USDA Discrimination Payments: A New Target for Check Fraud

As part of its broader effort to address historical injustices, the Biden administration recently began disbursing payments under the Inflation Reduction Act’s Discrimination Financial Assistance Program. This initiative is designed to provide financial relief to those who have suffered discrimination within the U.S. Department of Agriculture’s (USDA) Farm Service Agency Direct Farm Loan Program, with incidents occurring until 2021. The recipients of these payments are farmers, ranchers, and forest landowners who were unfairly treated due to discriminatory practices. While these payments are a step forward in righting past wrongs, they have unfortunately become a significant target for check fraud, which poses severe challenges for banks and financial institutions.

Why Treasury Checks Are a Magnet for Fraudsters

Treasury checks, such as those issued under the USDA Discrimination Financial Assistance Program, are particularly appealing to criminals. The reason lies in the inherent vulnerability of these checks: typically, banks must release funds before they can confirm whether the check is valid. This lag time between disbursement and verification is exploited by fraudsters, who may attempt to cash in on stolen or counterfeit checks before the bank can detect the fraud. According to reports, scammers have been actively targeting these specific USDA checks, seeking to exploit the current wave of check fraud plaguing financial institutions.

This rise in check fraud has been widely reported across the banking sector. Criminals are increasingly sophisticated in their methods, making it more difficult for banks to detect fraudulent activity until after funds have already been disbursed. This situation is particularly concerning given the large sums of money involved in the USDA program.

Financial Institutions: The Need for Heightened Vigilance

The scale of the USDA Discrimination Financial Assistance Program is significant, with over 43,000 individuals expected to receive payments. Congress allocated $2.2 billion to the program, distributed to those who qualify based on their experiences with the USDA’s Farm Service Agency. Recipients include more than 23,000 people who currently have or previously had farming or ranching operations. These individuals receive payments ranging from $10,000 to $500,000, with the average payment amounting to nearly $82,000. Additionally, over 20,000 individuals who intended to start farming or ranching but could not secure USDA loans due to discriminatory practices receive payments between $3,500 and $6,000, with an average payout of $5,000.

Due to the substantial financial stakes, financial institutions must exercise extreme caution when handling these payments. The increased risk of fraud requires banks to implement stringent verification measures, particularly given that these checks are now a known target for criminals.

Recommended Verification Processes

To mitigate the risks associated with cashing Treasury checks, banks are advised to only cash these checks for customers who have had accounts for at least one year. This precaution helps to ensure that the customer’s identity and financial history are well-documented, reducing the likelihood of fraudulent activity.

Each check issued under the USDA program also contains a unique reference code in the memo line. This code can be used to verify the authenticity of the check. Financial institutions can take an extra step by contacting the Treasury Department’s Discrimination Financial Assistance Program (DFAP) call center at (800) 721-0970. By providing the information found on the check, banks can confirm the validity of the payment, ensuring that it is not a counterfeit or stolen check.

Safeguarding Against Fraud: A Priority for Banks

As check fraud continues to rise, particularly with high-value Treasury checks, banks and credit unions must stay informed and vigilant. While well-intentioned and necessary, programs like the USDA Discrimination Financial Assistance Program also present new opportunities for fraudsters. Financial institutions can better protect themselves and their customers from falling victim to fraudulent schemes by understanding the specific risks associated with these payments and adopting robust verification processes.

It is essential for banks to stay ahead of these threats and to ensure that their staff is trained to recognize the signs of check fraud. This proactive approach not only safeguards the institution but also helps preserve its customers’ trust and financial security.

How to Spot Counterfeit U.S. Treasury Checks

In response to increasing concerns over counterfeit U.S. Treasury checks, the Secret Service and the U.S. Department of the Treasury have launched a new initiative called “KNOW YOUR U.S. TREASURY CHECK.” This campaign aims to educate the public on recognizing authentic Treasury checks and protecting themselves from fraud.

Key Security Features of Genuine Treasury Checks:

1. Treasury Seal:
   • On genuine checks, a new Treasury seal appears to the right of the Statue of Liberty. This seal should read “Bureau of the Fiscal Service.” Some checks may still display the older “Financial Management Service” seal until the existing stock is used up.
2. Bleeding Ink:
   • The seal next to the Statue of Liberty is printed with ink that runs and turns red when exposed to moisture. This is a simple and effective way to check the seal’s authenticity.
3. Watermark:
   • All authentic U.S. Treasury checks are printed on paper embedded with a watermark. When held up to a light source, the “U.S. TREASURY” watermark should be visible from both sides of the check.
4. Ultraviolet (UV) Overprinting:
   • Treasury checks include a UV pattern invisible to the naked eye but can be seen under a black light. Earlier checks may feature lines of “FMS” bordered by the FMS seal on the left and the U.S. seal (eagle) on the right. In 2013, a new UV pattern read “ISCAL SERVICE.” Either of these UV patterns may appear on a legitimate check.
5. Microprinting:
   • The back of an authentic Treasury check features microprinting with the text “USAUSAUSA.” This microprinting is a critical security measure that is difficult to replicate accurately.
6. Economic Impact Payment Checks:
   • For checks related to economic impact payments, the text will be located on the lower right side of the Statue of Liberty image, which reads: “Economic Impact Payment President Donald J. Trump.” This feature was a feature of the checks issued during the COVID-19 pandemic.

Verification Tool:

To further ensure the legitimacy of a U.S. Treasury check, you can verify the check details using the Bureau of the Fiscal Service’s Treasury Check Verification Application (TCVA). This online tool can be accessed at https://tcvs.fiscal.treasury.gov/  and provides an additional layer of security by allowing users to confirm the check’s authenticity.

By familiarizing yourself with these security features and using the Treasury Check Verification Application, you can better protect yourself from counterfeit checks and ensure that any U.S. Treasury check you receive is genuine.

This information was sourced from an article titled “USDA Discrimination Payments Are Targets for Check Fraud,” published by the American Bankers Association in their Banking Journal. The original article discusses the risks and challenges financial institutions face in processing these Treasury checks and provides recommendations on how to handle such payments securely. You can read more about it here.