how to prevent check fraud

How Your Business Can Prevent Check Fraud

It’s important to have a secure payment system to keep your business running smoothly. Keeping track of all accounts receivable and all accounts payable will help your business make better decisions and develop a better understanding of its financial position, and it will prevent you from being a victim of accounts receivable scams, accounts payable fraud schemes, and check fraud.

Similarly, it will also be important to keep an eye out for possible cases of fraud. One type of fraud that is often overlooked is check fraud. There are multiple different types of check fraud. Scammers will forge checks in the name of your business, and, in other instances, they may also try to convince you to cash a check they know is illegitimate.

In some cases, check fraud can be reversed. Your bank may already have systems in place to detect possible signs of fraud, which can be very helpful. But even when instances of check fraud can be overcome, this sort of activity can still have a major impact on your business. To avoid future interruptions to your business operations, you have to be proactive and take active measures to combat check fraud in advance.

In this blog, we discuss some of the most important things business owners need to know about preventing check fraud. While check fraud can indeed be rather intimidating, there are several ways your business can effectively mitigate risk.

What is Check Fraud?

Check fraud is a broad term used to describe activity involving forged checks, unauthorized checks, or checks that the check issuer knows are not legitimate. Usually, the purpose of check fraud schemes is either to steal money from another account or to “clean” illegitimate money by getting it into the banking system.

Check fraud schemes can often be complex. According to the Federal Trade Commission (FTC), “In a fake check scam, a person you don’t know asks you to deposit a check — sometimes for several thousand dollars, and usually for more than you are owed — and send some of the money to another person.” The FTC report later states, “Fake checks come in many forms. They might look for business or personal checks, cashier’s checks, money orders, or a check delivered electronically.”

Generally, if something seems too good to be true (like receiving payments you never earned), it probably is. Check fraud can best be prevented by being vigilant and keeping close track of every business account.

Check Fraud Statistics

In 2019, the American Bankers Association conducted a detailed survey in order to determine the extent of check fraud and find possible solutions to prevent it. Some of the most notable conclusions from the survey included:

· “Fraud against bank deposit accounts amounted to $25.1 billion in 2018, up from $19.1 billion in 2016.” This indicates that instances of fraud (in general) are on the rise.

· “In 2018, check fraud accounted for 47 percent or $1.3 billion of industry deposit account fraud losses.”

· “Survey respondents rated customer victimization scams (e.g., fake check scams, internet job scams, lottery scams), phishing emails and business email compromise (BEC) schemes, social engineering (including recruitment of money mules via social media), elder financial abuse, and ATM/gas pump skimming as the leading risks to the industry and its customers in the next 12 months.”

Out of the many business fraud schemes, check fraud is one of the most common and widespread scams. Even savvy business owners can be subject to having their valuable financial information get into the wrong hands.

Important Check Security Features

In addition to the risks identified by the American Banking Association, business owners who regularly issue checks could also be exposed to the dangers of check alteration, forged signatures, compromised check numbers, and completely forged checks (printing and issuing checks in your business’ name without authorization).

Fortunately, SmartPayables and other leaders in the industry have implemented many innovative security measures to help business owners print and issue checks more securely. SmartPayables 16 SafeChecks security features include:

· Controlled paper stock.

· Fourdrinier watermark.

· Thermochromatic ink.

· Toner anchorage.

· Explicit warning bands.

· Copy void pantograph.

· Chemical sensitivity.

· Chemical wash detection box.

· Sequence inventory control numbers.

· Laid lines.

· Visible fibers.

· Microprinting.

· Payee area protection.

· “Do Not Negotiate” on the back panel.

· Security features listed on the back of the check.

Each of these security features helps reduce the risk of check fraud and check forging.

SmartPayables also strongly encourages all its clients to implement positive pay. Positive pay is a system designed to ensure that any check being cashed in your name has been explicitly authorized by you.

With positive pay, a record will contain every outstanding check that’s been authorized — if another party attempts to cash a check in your name that hasn’t been authorized, the check will be rejected (and a potential fraud investigation may begin). Reverse positive pay systems will also afford business owners a chance to confirm the check’s legitimacy on their own.

Check Issuing Best Practices

As long as scammers see an opportunity to make money by committing check fraud, check fraud will remain an issue, unfortunately. Business owners are especially likely to be targeted by check scams. In addition to implementing the security features mentioned above, it is still extremely important for all business owners to pay attention to all funds flowing into and out of their business accounts.

Regularly reviewing all financial and bank statements will help make identifying possible signs of check fraud easier. During each statement period, your business should make sure there are no expenses that have not been authorized. Furthermore, you should also avoid accepting any funds you are not expecting or from sources you do not trust. You should address any signs of suspicious activity immediately.

Conclusion

Check fraud can be an intimidating topic that business owners simply would prefer to ignore. But rather than ignoring this prevalent financial risk, it will be crucial for your business to take action. By working with a reliable check printing and issuing service, implementing additional security measures, and closely monitoring all accounts, you can minimize the risk of falling victim to check fraud and position yourself for long-term success.

Interested in learning more about how your business can prevent check fraud? Visit SmartPayables to learn more, and don’t hesitate to reach out and contact us with any questions.

Author at Smart Payables | (720) 287-0030 | Website | + posts

Founded in 2005, Smart Payables offers a full range of accounts payable payment solutions including outsourced check printing and mailing, document and statement printing and mailing, ACH direct deposits + more. Our highly experienced software developers and intelligent printing teams specialize in secure, enterprise-grade payment options that are HIPAA, SOC 1 Type 2, and ISO compliant. Our mission is to help businesses and large organizations implement secure, innovative technology that will reduce overhead and improve business operations and capabilities.

Sign Up

REQUEST A QUOTE