One of our major clients, who issues between 400 and 500 payroll checks for each pay period, has twice this year been a victim of fraudulent checks. Its gotten to the point where banks will not process any payroll checks.
The most likely cause of this problem is security of the processed checks, now that banking customers are able to use scanners to make their deposits and banks have given the customers the ability to forward pictures of checks to be deposited. What happens to the deposited checks? They should be shredded or destroyed, but that typically is not the case.
In days past there was a chain of custody for cancelled checks, but today cancelled checks can be pulled out of the garbage or sold. This is especially true when people use third parties such as check cashing places to cash their checks.