A check is considered fraudulent when the person who wrote it either intentionally falsified information on the document or else issued the check knowing it would not clear (for example, because the account has no money in it). Sometimes, the person who tries to cash a fraudulent check is not the person who wrote the check. In many cases, the holder of the check may have received it as payment for a good or service. If the person tries to cash the check, several outcomes may occur.
The Check Goes Through
In some instances, the vendor who is cashing the check may not immediately detect that the check is fraudulent. In this case, the vendor may cash the check, only later to discover that the check did not go through. When that happens, the person who successfully cashed the check is required to return the money, even if he did not write the check. He, in turn, may seek compensation from the person who passed the fraudulent check to him.
The Check Is Refused
In some cases, the vendor may immediately identify the check as fraudulent. The vendor may do this either by identifying some distinguishing physical feature to the check that indicates its phoniness or because she is able to quickly determine from the financial institution that issued the check that the account linked to the check will not be able to cover it. In this case, the vendor will refuse to cash the check and may summon authorities.
If You Know It's Fraudulent
Knowingly cashing a fraudulent check is against the law and is a form of fraud. Punishment for committing check fraud varies by state. In some states, the crime is punishable by a fine; in other states the penalty may include jail time.
"Hot" Check Laws
Many states have special "hot" check laws. Under a hot check law, people are guilty of a crime if they attempt to pay for a service or receive other compensation, such as cash, for a check that the know will bounce. Although this, too, is a form of fraud, the penalty for knowingly passing a hot check is generally less severe then the penalty for other forms of fraud, such as check forgery.