How surety bond fraud works: fake sureties, forged powers of attorney, individual-surety asset fraud, altered and fake e-bonds, and the financial-statement fraud ICISA's 2026 paper describes. Plus how to verify a bond.
Education only / verify at source / not legal advice. This page describes common patterns of surety bond fraud and general ways to check that a bond is genuine. It draws on official government sources, industry association guidance and a 2026 industry working paper. It is not a fraud-detection service, and it does not say whether any particular surety, bond or person is legitimate. Global Guarantors publishes industry education. We aren't a surety, broker or law firm, and we don't publish premiums. If you suspect fraud, contact the surety directly through independently found contact details, and speak with the appropriate authorities and licensed counsel.
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A surety bond is a promise on paper. The obligee, often a public owner, a general contractor or a licensing authority, accepts that paper in place of something it cannot easily check for itself: that a contractor will finish the job, pay its subcontractors and suppliers, or follow the rules of its licence. When the paper is genuine and the surety behind it is real and properly authorized, that promise has value. When it is not, the obligee may discover the problem only when it needs the bond most.
Surety bond fraud comes in more than one shape. Some fraud is aimed squarely at the people who buy or rely on bonds: a fake surety company, a forged bond, a forged power of attorney, an individual surety who pledges assets that do not exist. Other fraud is aimed somewhere else entirely, at lenders, investors or tax authorities, and lands on the surety only when a business or financing structure collapses. A 2026 working paper from the International Credit Insurance & Surety Association (ICISA) focuses on that second kind.
This guide explains both kinds in plain English, sets out the red flags that tend to come with each, walks through a verification flow that obligees and contractors can use before they rely on a bond, and summarizes three reported US prosecutions. If you are new to how bonds work, start with our surety bond fundamentals hub.
A bond works as a three-party arrangement. The principal (usually a contractor or licensed business) buys the bond, the surety backs the principal's promise, and the obligee is protected if the principal fails. Public owners require performance and payment bonds because they cannot easily absorb a defaulted contractor or unpaid subcontractors, and licensing authorities require licence bonds to give the public a source of recovery. Our guide to why obligees require bonds explains that logic in more detail.
Fraud breaks the arrangement in different places depending on who is hurt.
For obligees, a fake or forged bond means the protection they thought they had may not exist. The Associated General Contractors of America's surety claims guide puts it bluntly: "Fraudulently issued bonds can leave principals in breach of their contracts and leave obligees without any protection of any kind." An owner that accepts a fraudulent bond may only find out after a default, when it calls on a surety that never issued the bond or does not exist.
For contractors and subcontractors, a fraudulent bond can be just as damaging. A general contractor that buys what it believes is a genuine bond from a fraudulent seller may have paid for nothing, and may be in breach of its own contract with the owner. Subcontractors and suppliers who rely on a payment bond for their protection on a public project may find there is nothing behind it. The AGC guide advises contractors to "ensure that the bonds provided for a project are authentic."
For sureties, the exposure runs the other way. A surety may be impersonated, with its name and seal used on bonds it never wrote, or it may be the one left holding the loss when a principal's apparently sound business turns out to have been built on false financial information.
That is why fraud is a fundamentals topic. Everyone in the bond chain has a reason to understand how it happens and what checks reduce the risk.
ICISA, which describes itself as an association that "brings together the world's leading companies that provide trade credit insurance and/or surety bonds," draws a useful distinction in its October 2026 article When Fraud Isn't What It Seems:
"For trade credit insurers and surety providers, the fraudster is often not targeting the insurer at all. Yet when a transaction or financing structure collapses, the insurer can still be left carrying the loss."
That framing gives two broad families of surety bond fraud.
Fraud aimed at the bond buyer or obligee. Here, the fraudster wants a party to accept a bond that is not what it appears to be. The fake surety, the forged bond, the forged power of attorney, the worthless individual-surety pledge and the doctored scan all belong in this family. The victim is usually the obligee, the contractor who paid for the bond, or the subcontractors who relied on it. The surety may be a victim too, when its name is used without permission.
Fraud that lands on the surety. Here, the bond itself may be completely genuine, issued by a real surety to a real principal. The fraud sits underneath, in the principal's financial statements, its corporate structure or the transactions it is running. The surety underwrote what it was shown, and it is left with the loss when the truth comes out. In ICISA's words, "the real risk was often hidden beneath a transaction that appeared sound on paper."
The checks that catch each kind are different. Obligees and contractors can catch most of the first kind with routine verification. The second kind is mainly an underwriting problem, which is why ICISA's recommendations are addressed to underwriters.
The most basic surety bond fraud is a bond from a surety that is not real, or that is not authorized to write the bond it appears to back. The bond may look professional, carry a convincing name and seal, and arrive through what seems like a normal channel. What is missing is a real, authorized company standing behind it.
There are a few variations:
Michigan's Department of Insurance and Financial Services makes the last point in its surety FAQ. It explains that an organization requiring a bond "may not accept a bond from an unauthorized insurer because it does not have the same regulatory and legal avenues" that it has with an authorized insurer to dispute non-payment of claims. That FAQ is about authorization, not about fake sureties, but it shows why authorization matters: the regulatory system behind an authorized surety is part of what makes a bond worth accepting.
Where to check. For US federal bonds, the Bureau of the Fiscal Service publishes Department of the Treasury Circular 570, the list of companies holding certificates of authority to write or reinsure federal bonds. Its most recent update was August 1, 2026. State insurance departments maintain their own records of insurers admitted to write surety in their state, and the AGC guide recommends checking the state insurance department for admission. In Canada, the authority that licenses insurers, including sureties, depends on the company and the province or territory. Check with the insurance regulator in the province or territory where the bond is required.
Red flags. A surety you cannot find on the list that applies to the bond; a surety name that is close to, but not the same as, a known company; contact details that only appear on the bond itself; and pressure to accept the bond quickly without the usual checks.
A forged bond uses a real surety's name, but the surety never issued it. Because a surety acts through an attorney-in-fact, the person authorized to sign bonds on the surety's behalf, a forged bond often comes with a forged or altered power of attorney (POA) to make the signature look valid.
The POA is the document that links the person who signed the bond to the surety. It typically names the attorney-in-fact and sets out the limits of their authority. If the POA is forged, the signature on the bond may have no authority behind it, and the surety may have no record of the bond.
A reported federal case illustrates the pattern. The US Attorney's Office for the Northern District of Alabama reported in July 2014 that a government contractor "submitted forged performance and payment bonds and a power of attorney" to obtain authorization to start work on an Army roofing contract, and that the contract was later terminated "for providing fraudulent bonds." The case is summarized in more detail below.
Red flags. A power of attorney that is missing or hard to read; a signer who isn't the attorney-in-fact the POA names; details on the bond that don't line up with the POA; and a surety that, when contacted directly, has no record of the bond or the attorney-in-fact. On US federal bid bonds, FAR 28.101-3 requires anyone signing as attorney-in-fact to include evidence of authority to bind the surety, so a missing POA is itself a reason to stop and check.
The core check. Contact the surety directly, using contact details you found independently, not the ones printed on the bond or supplied by the person delivering it. Ask the surety to confirm that the bond was issued, the bond number, the principal, the obligee, the amount and the attorney-in-fact. The Surety & Fidelity Association of America publishes a Bond Verification Directory, a list of verification contacts at member sureties. It is a contact directory, not a verification tool, but it can help you find a published contact.
US federal procurement allows, in some circumstances, an individual surety: a person, rather than a company, who pledges specific assets to back a bond. The Federal Acquisition Regulation (FAR) sets strict rules for this. Individual sureties must pledge eligible assets, and under FAR 28.203-1(c) the contracting officer relies on Treasury's assessment of whether pledged assets are eligible and what they are worth.
The fraud risk is obvious: the pledged assets may be overvalued, encumbered, or not exist at all. The FAR anticipates this. Under FAR 28.203-5, causes for excluding an individual surety include:
Individuals who are excluded are listed in the System for Award Management (SAM), and contracting officers may not accept them as sureties without a written waiver.
The FAR also tells contracting officers what to do when something looks wrong. FAR 28.203-1(g) provides: "Evidence of possible criminal or fraudulent activities by an individual surety shall be referred to the appropriate agency official in accordance with agency procedures."
One reported prosecution, summarized below, involved surety bonds that were secured by worthless "gold certificates."
Red flags. Pledged assets that are unusual, hard to value or not the kind the FAR treats as eligible; documents that cannot be independently checked; an individual surety who appears in SAM exclusions; and an affidavit with figures that do not reconcile.
Where to check. The SAM exclusions list for the individual's name, and the agency's own procedures for asset review. Individual sureties are a US federal concept; they are not a feature of ordinary Canadian construction bonding.
Bonds are increasingly delivered electronically. That is convenient and, done properly, secure. It also creates a new opportunity: a scan of a paper bond can be changed.
The Surety Association of Canada (SAC) explains the difference clearly in its e-bonding FAQ. A scanned bond is not an e-bond:
"A scanned bond is a 'picture' of a paper bond, which can easily be opened in a photo editing type of software that can then be potentially altered or changed."
SAC says a proper e-bond must meet three threshold criteria: integrity of content (the document received is the true document executed and has not been changed), secure access (only authorized parties can view or download it), and verifiability and enforceability (assurance that the parties identified duly executed it and that it is enforceable). SAC adds that e-bonds typically contain a digital signature, a digital corporate seal and a verification tag or link to check that the document has not been altered.
That gives obligees a simple rule of thumb. A genuine e-bond can be verified through its own verification mechanism. A PDF that is only an image of a paper bond, with no verification link, cannot be checked the same way and may have been altered. Our guides to digital bond verification and e-bonding explain how verification links and electronic bond platforms work.
Paper bonds can be altered too: a changed amount, a different obligee name, a swapped project description or an edited date. The forged-bond case summarized below shows that bond documents themselves can be falsified. As ICISA's paper notes in a broader context, "Paper trails can be forged, and often were."
Red flags. A "digital" bond that is only an image; no verification link or tag; fonts, spacing or alignment that look inconsistent; a bond form that differs from the form the contract requires; and amounts or names that do not match the contract.
The second family of fraud is harder to see. The bond is genuine. The surety is real. The fraud sits in the principal's own business.
ICISA's Fraud Working Group examined this kind of fraud in its working paper "Fraud" – Not That Simple: Understanding Fraud Patterns in Trade Finance, Credit Insurance and Surety, published in October 2026. The paper looks at five cases across fuel distribution, automotive financing, supply chain finance, receivables finance and commodity trading. It is important to be clear about scope: the paper is mostly about trade credit insurance and financing structures. Only one of its five cases involves a surety bond, a first-demand customs and excise bond for an Italian fuel distributor. It did not study US or Canadian construction bonds.
Even so, its central finding is relevant to anyone who underwrites or relies on a principal's financial picture:
"The common thread is that none of these frauds would have been caught by looking at financial statements or ratings alone."
The ICISA article makes the same point: "Clean financial statements and strong ratings did not necessarily reveal the underlying problems."
On the surety case specifically, the paper describes how a first-demand bond behaves under fraud:
"A first-demand bond pays out on demand — as the Italian case shows, the surety exhausted its full limit even while criminal investigations were still ongoing."
It also draws a lesson about sectors where the business model itself carries risk: "balance-sheet strength alone is insufficient where business models are exposed to regulatory arbitrage and tax fraud risks."
Why does this matter for surety more broadly? A surety's decision to back a principal depends heavily on financial statements, as our guide on surety vs insurance and indemnity explains in the context of the indemnity agreement. If those statements are misleading, or if the business is structured in a way that hides related-party dealings or circular trades, the surety may be extending its credit on a false picture.
ICISA is careful not to overstate the point:
"Complexity itself is not evidence of fraud."
And its article closes with a line that captures the theme well:
"Fraud may not always look like fraud. Sometimes it looks like growth, liquidity, a strong rating—or simply a complicated transaction."
ICISA's paper is addressed mainly to insurers and sureties. Its first message is that fraud is not only a problem for the claims department. In the article's words: "fraud risk is not solely a claims issue. By the time a claim arrives, many opportunities to prevent or contain the loss may already have disappeared." The paper itself puts it this way: "fraud isn't just an issue that is upon claims-teams to clean up after the fact. It has to be part of how insurers underwrite and manage the portfolio in the first place."
Its recommendations, in close paraphrase or quotation, are:
The paper is realistic about limits: "None of these measures will totally mitigate fraud." For readers who want to understand the wider discipline, our overview of how surety underwriters assess risk covers the main areas underwriters look at.
For obligees and contractors, most fraud aimed at bond buyers can be caught with routine checks done every time, not only when something feels wrong (see the red flags that warrant a second look in our public owner's guide). The steps below are general. Your contract, procurement rules or statute may require more.
1. Is the surety on the right list? For US federal bonds, check Treasury Circular 570 for the surety's name and the bond type. For state and local work, check the state insurance department's records of admitted sureties. In Canada, check with the insurance regulator in the relevant province or territory. Check on the day you accept the bond, not from a saved copy.
2. Contact the surety directly. Use contact details you found independently: the surety's own published verification contact or the SFAA Bond Verification Directory. Do not rely only on the phone number, email or website printed on the bond or supplied by the person handing it over. Ask the surety to confirm the bond number, principal, obligee, amount, effective date and attorney-in-fact.
3. Check the power of attorney and attorney-in-fact. Confirm that a POA is attached and legible, that the person who signed the bond is the attorney-in-fact it names, and ask the surety to confirm that both the POA and the bond are genuine.
4. Compare the form. Check the bond against the form your contract or statute requires. Look for changed wording, amounts, obligee names, project descriptions and dates.
5. Verify any e-bond through its own link. A genuine e-bond carries a verification mechanism. Use it. A scan of a paper bond is not an e-bond and cannot be verified the same way.
6. Individual surety (US federal): check assets and exclusions. Follow the FAR's asset-eligibility rules and check SAM for exclusions.
7. Refer suspected fraud. On US federal contracts, FAR 28.203-1(g) requires evidence of possible criminal or fraudulent activity by an individual surety to be referred to the appropriate agency official. More generally, report suspected fraud to the surety whose name appears on the bond and to the appropriate authorities, and speak with counsel.
None of these steps accuses anyone. They are the same checks a careful obligee runs on every bond, and genuine sureties expect them.
The cases below are summarized neutrally, as reported by the government offices named. They are historical; each office's release is the authoritative account. They are included to show what these patterns can look like in practice, not to suggest anything about any surety or contractor today.
As reported by the US Department of Transportation Office of Inspector General on December 2, 2021, four defendants were sentenced in US District Court for the Southern District of Florida in November and December 2021. They had been indicted for using various businesses to obtain payments from construction companies in exchange for fraudulent surety bonds secured by valueless gold certificates. According to the DOT OIG, the scheme included the March 2015 sale of a fraudulent surety bond, purportedly worth nearly $23 million, to contractors working on a federally funded bridge replacement project; the victims paid over $919,000 for it.
Patterns shown: fraudulent bonds backed by worthless assets.
As reported by the US Attorney's Office for the Northern District of Alabama on July 29, 2014, a government contractor "submitted forged performance and payment bonds and a power of attorney" to obtain authorization to start work on an Army roofing contract. The contractor won the contract but was terminated "for failing to perform the work and for providing fraudulent bonds." The individual was sentenced to nine years in prison on wire fraud and other counts.
Patterns shown: forged bonds; forged power of attorney.
As reported by the US Department of the Interior Office of Inspector General on March 16, 2018, a New Mexico contractor hired to renovate a school building was required to obtain and provide a surety bond, but instead "produced a fictitious surety bond that falsely appeared to be under the authority of a legitimate surety company." The contractor pleaded guilty to passing fictitious obligations and to tax evasion, and was sentenced to 27 months in prison.
Patterns shown: fake or impersonated surety.
| Pattern | Who it hits | How to spot it | Where to check |
|---|---|---|---|
| Fake or non-existent surety | Obligee; contractor who paid for the bond; subcontractors relying on it | Surety not on the applicable list; name close to a known company; contact details only on the bond | Treasury Circular 570; state insurance department; Canadian federal or provincial regulator |
| Forged bond or power of attorney | Obligee; impersonated surety | POA missing or not matching the signer; surety has no record | The surety directly, through independently found contacts |
| Individual-surety asset fraud (US federal) | Federal agency; subcontractors and suppliers | Unusual or hard-to-value assets; figures that do not reconcile | FAR asset rules; SAM exclusions |
| Altered form or scanned "e-bond" | Obligee | Image-only PDF; no verification link; wording that differs from the required form | The e-bond's own verification link; the required form |
| Financial-statement or structure fraud | Surety or insurer | Clean statements that do not explain the business; related-party or circular dealings; sudden growth | Underwriting due diligence and monitoring |
What is surety bond fraud? Any scheme that uses a surety bond deceptively. It includes fake sureties, forged bonds and powers of attorney, false individual-surety pledges and altered bond documents, and also fraud by a principal that leaves a genuine surety carrying a loss.
How can I tell if a surety bond is fake? No single sign proves it. Run the routine checks: confirm the surety's authorization, contact the surety through independently found contacts to confirm the bond, check the power of attorney, compare the form and verify any e-bond through its link.
Is a scanned PDF of a bond an e-bond? No. The Surety Association of Canada says a scanned bond is a "picture" of a paper bond that can be altered. A proper e-bond typically carries a digital signature, digital seal and a verification tag or link.
Does Treasury Circular 570 confirm that a bond is genuine? No. It lists companies holding certificates of authority to write or reinsure federal bonds. It tells you whether a company is on the list, not whether a particular bond was issued. Confirm the bond with the surety directly.
What is an individual surety? On US federal work, a person who pledges specific eligible assets to back a bond, under the FAR's rules, instead of a surety company.
What should a federal contracting officer do about suspected individual-surety fraud? FAR 28.203-1(g) says evidence of possible criminal or fraudulent activities by an individual surety "shall be referred to the appropriate agency official in accordance with agency procedures."
Is a bond from an unauthorized insurer the same as a fake bond? Not necessarily. An unauthorized insurer may be a real company. But, as Michigan's insurance department explains, an organization requiring a bond may not accept one from an unauthorized insurer because it lacks the same regulatory and legal avenues to dispute non-payment of claims.
Did ICISA's 2026 paper study construction bonds? No. It is mostly about trade credit insurance and financing structures. Its one surety case is an Italian customs and excise bond. Its lessons about looking beyond financial statements are general.
Can fraud happen even when the bond is genuine? Yes. ICISA's paper describes fraud that targets lenders, investors or tax authorities and lands on the surety when the structure collapses. In the Italian case, the first-demand bond paid out in full while criminal investigations were still ongoing.
What should I do if I suspect a bond is fraudulent? Do not rely on it until it is confirmed. Contact the surety named on the bond through independently found details, notify the appropriate authorities, and speak with licensed counsel. On federal work, follow your agency's procedures. For how genuine bond claims work, see the surety claims basics guide listed under Related reading.
Retrieved or confirmed October 12, 2026 (PT).
