Preventing Check Fraud

What You Can Do About It

Check Fraud - A New Priority for Today's Businesses

Check Fraud is a problem that will cost American businesses and banks an estimated $50 billion this year alone. These days anyone with access to a personal computer, a scanner and off-the-shelf software can create doctored corporate checks that even a seasoned CFO would have trouble spotting. Technology-savvy criminals can reproduce hundreds of realistic counterfeit or forged checks in a matter of hours if they access basic corporate account information.

Check fraud hits your company's bottom line directly. It also disrupts your business. Imagine the hassle you'd have to go through to close accounts, issue stop payments, order new checks and reissue payments. The concept is therefore simple and straightforward: Your company needs to take basic steps to protect itself against the threat of check fraud.

Historically, many companies have not taken the probability of check fraud seriously - primarily because banks were often held responsible for check fraud losses. However, recent changes in the Uniform Commercial Code have redefined liability for corporate check fraud to include a standard of "ordinary care" that emphasizes greater responsibility and reasonable check issuing standards by the business community. Financial institutions are no longer automatically expected to shoulder the burden of check fraud-related losses. Companies themselves may now be held responsible as well.

Preventing Check Fraud

Preventing check fraud is not a simple task. There are many things to be done that, when executed together, will help to protect yourself from check fraud. While we are trying to offer some tips to help you fight check fraud, this list is neither exhaustive nor does it suggest that you can be 100% fraud-proof.
If you have additional suggestions to add to this list, submit it to us at StopCheckFraud.

Here is a partial list of ways that you could be hit by check fraud:
  • Stolen issued checks
    -- Mail theft is another growing trend in this country, and your checks are at risk from the moment they are printed, until the moment they are cashed.
  • Check alteration
    -- This is most common with payroll checks. A check for two hundred dollars could become a check for two thousand dollars.
  • Copying checks
    -- Changing various information on a check and making a color copy has also proven easy and effective.
  • Stolen check materials
    -- Pre-printed check stock could almost be considered "same as cash." It is remarkable that in todays fraud environment, companies still use pre-printed check stock (often with the signature also pre-printed).
  • Home printing
    -- A computer, laser printer and criminal mind combine to make a "check factory."
  • Unauthorized printing within your company
    -- We all have great employees. Nevertheless, internal check fraud is as great a threat as external check fraud. Employees who have access to all aspects of accounting and check printing have plenty of opportunity. Other employees who have access to the check printer are also carry a risk factor.
Here is a partial list of things you can do to prevent check fraud:
  • Don't use pre-printed check stock
    -- Pre-printed check stock makes fraud as easy as filling in the blanks. Use blank check stock in conjunction with a micr laser check printing software.
  • Use tightly controlled check printing procedures
    -- Ensure that employees not involved in the accounting process do not have access to check printing equipment. Your company printer should be different from your check printer.
  • "Checks" and balances
    -- Literally. If you think there is a risk of internal check fraud, make sure that one person does not have access to the entire process. Fragment the procedures so that a persons activities will only affect part of the process.
  • Use check stock with security features
    -- Check stock now has its own security features that prevent copying or mimicking. Magnetic toner has also made home printing more difficult and expensive.
  • Use a Positive Pay software
    -- Positive Pay is currently the most effective weapon against check fraud. The bank only pays the checks listed in your Positive Pay file. Unauthorized checks are not paid, and you are notified of their existence.
  • Write fewer checks by using automatic deposits or electronic funds transfers
    -- Let's face it: The most effective way to wipe out check fraud is to stop writing checks completely. Unfortunately, due to system-wide compatibility and integration we are still years away from a so-called checkless society. Forecasters say that within ten years, electronic transactions will have replaced only 25% of our check writing needs.

While many businesses feel that the risk of check fraud loss is not great enough to necessitate any action, they fail to realize that a single incidence of check fraud would likely cost more than the cost of the basic fraud prevention measures that would prevent it.

If you would like to know more about some of the fraud prevention tools available today, CLICK HERE.

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