Cheque Fraud: Red Flags and Bank Evidence

How Cheque Fraud Still Happens

Cheque fraud can change a genuine instruction or create an instruction the account holder never gave. The main forms leave different evidence:

• A forged drawer signature imitates the person instructing their bank to pay. Compare the signature with the bank’s mandate and genuine signed documents.
• An altered cheque changes the payee or amount after the drawer signs it. Compare the image with the cheque stub, invoice or original payment instruction.
• A counterfeit cheque copies a bank’s or customer’s cheque design. A convincing appearance does not establish that the bank issued it.
• A stolen cheque book gives someone genuine blank forms. Missing leaves and payments inconsistent with the drawer’s records help identify which cheques need investigation.
• Cheque kiting moves cheques between accounts to exploit the delay before the bank confirms payment. The apparent balance contains money that does not exist.

Queensland Police’s cheque fraud guidance recommends using cheque numbers in sequence and checking for missing leaves. For an older person, someone with access to the home or paperwork can obtain a cheque book without having online banking access. An estate can inherit unused books and disputed payments whose explanation died with the account holder. The wider investigation can include signs of elder financial abuse.

Australia’s cheque wind-down does not remove those existing records or disputes. Treasury’s Cheques Transition Plan sets separate milestones for stopping issuance and acceptance. Some banks stop earlier. Use the official timetable when assessing whether a particular institution can still issue or accept the cheque concerned.

Cheque kiting, written “check kiting” in American sources, involves two or more accounts and provisional cheque credits. A person deposits a cheque drawn on account A into account B, then uses another cheque to create apparent funds in A. Withdrawals made before the banks finish clearing draw on the artificial balance. The scheme depends on access to uncleared funds. A bank that withholds those funds removes that opportunity.

Fake bank cheques also appear in Australian private sales, including vehicle sales. The seller releases the goods because a document looks bank-issued or a credit appears in the account. NAB’s bank cheque policy explains that a forged bank cheque can be dishonoured. Contact the issuing bank using a number you find on its official website.

Ask it to confirm issuance and explain how to establish payment before releasing the goods. If it cannot authenticate the cheque, keep the goods until your bank confirms the payment has cleared.

Red Flags on the Statement

Cheque numbers and the timing of deposits help you select transactions for image retrieval. Start with the full statement period and compare the entries against the cheque book, including unused leaves.

Look for numbers outside the usual sequence, duplicated numbers and cheques presented long after the book was issued. A gap can mean an unused or cancelled cheque. A repeated number can reflect a reversal or a reporting issue. Request the underlying images before treating either as evidence of theft.

An old cheque book can contain a recently written cheque, so distinguish the book’s issue date from the date written on the cheque. Record the presentation date separately. In an estate matter, compare each event with the drawer’s death and the bank’s receipt of notice.

For suspected kiting, place statements from the connected accounts in one chronology. Match each cheque deposit to the corresponding debit, then identify withdrawals made before collection and any later dishonour. Repeated circular movements strengthen the kiting hypothesis. A single dishonoured deposit can have other explanations.

Consider a hypothetical example. Account B receives a $12,000 cheque drawn on account A, although A has only $200. B allows an $8,000 withdrawal before collection. Another cheque from B is deposited into A to cover the first cheque.

When a bank rejects an unfunded cheque, the provisional credit reverses and exposes the shortfall. The evidence is the connected sequence across both accounts, supported by deposit and dishonour records.

FinTrace saves lawyers, forensic accountants and investigators hours of statement review by consolidating supplied PDFs into a searchable ledger and a clear findings report. Suspicious transactions are flagged with source PDF filenames and pages, so the supporting statement evidence is already at hand. That helps you isolate the payments and account movements for which cheque images are needed.

Getting Cheque Images From the Bank

Request the front and back of each disputed cheque together with the records linking it to the statement entry and collecting account. A front image shows the drawer signature, payee and amount. The back can show endorsements and bank processing marks. These details must be read with the deposit record to identify the account credited.

Use an account holder’s authority where it covers the records requested. An estate representative must establish their authority through the bank’s estate process. Authority over the drawer’s account does not give unrestricted access to a third party’s collecting account. Obtain that account’s records through the applicable court process or another lawful authority.

For a subpoena, identify the account, transaction period and disputed cheque numbers or amounts. Specify the records you need:

1. Front and back images at readable resolution, including all endorsements and processing marks.
2. Deposit slips and associated voucher records identifying the collecting bank and account credited.
3. Presentment, collection and dishonour records linking the cheque to its statement entry.
4. The account mandate and authorised-signature records needed to assess the disputed signature.

Follow the relevant court’s subpoena rules and the bank’s service requirements. NAB publishes its requirements for serving legal notices. Use the separate guide to requesting bank records by subpoena when preparing the request.

NAB’s cheque image instructions distinguish the voucher image, its overleaf and associated items. Asking only for a statement can therefore miss the evidence needed to trace the cheque. For historic matters, establish what survives through a targeted request for old bank statements and related records.

An endorsement names an apparent recipient, but it can itself be forged. The collecting account identifies where the bank credited the proceeds. Neither alone proves who physically deposited the cheque or who ultimately benefited. Use account ownership and later transactions to resolve those separate questions.

Bank Liability Under the Cheques Act

Bank liability depends on which bank handled the cheque, who had title to it and the statutory protection that applies. The drawer’s bank pays from the drawer’s account. The collecting bank receives the proceeds for its customer.

A conversion claim can arise when a collecting bank collects a cheque for someone who is not entitled to it. The claimant must establish their own title or right to possession. Under section 95 of the Cheques Act 1986 (Cth), a collecting bank can be protected if it receives payment in good faith and without negligence. That protection addresses liability to the true owner arising solely from collection for a customer with no title or defective title.

Section 95(2) also limits what an irregular or missing endorsement proves. Its conditions concern an order cheque that has not been negotiated and a payee name matching, or reasonably resembling, the customer’s name or business name. Where those conditions apply, the endorsement defect alone does not establish negligence.

In Oris Funds Management Ltd v National Australia Bank Ltd [2005] VSCA 148, the Victorian Court of Appeal examined the bank’s collection of company cheques. The bank bore the burden of establishing that it acted without negligence. The Court upheld its protection after examining the contractual documents and circumstances known to the bank. The inquiry concerned prudent banking practice in that transaction. A payment into another entity’s account did not automatically defeat the defence.

A forged drawer signature raises a separate question under section 32: an unauthorised signature is generally inoperative, subject to the statutory exceptions. The drawer’s own conduct can affect recovery. The Legal Services Commission of South Australia’s cheque guidance identifies carelessness and failure to notify the bank promptly after discovering a forgery as possible obstacles. Preserve evidence of how the cheque was prepared and when the forgery became known.

Build the claim around the cheque images and collection records, then the evidence of authority, title and bank conduct. Notify the affected bank promptly, preserve its response and keep each disputed payment connected to its original statement entry.