Business Check Fraud: 2nd Largest Type of National Financial Fraud
Check fraud protection is one of the looming accounts payable issues within the structure of business. The latest methods of loss protection and fraud detection are discussed and addressed as addressed by loss prevention insiders and noted authority experts.
The second largest type of fraud perpetrated on business is check fraud. Since this is so prevalent, it is well worth the time to be informed of the latest detection and prevention ideas.
The criminal element today is computer savvy and technically gifted by way of the free and garnered information via the Internet. Witness the basic IQ equivalents of those in prison compared to the rest of the population; there are a proportional number of intelligent criminals on the loose who have no intention of legitimately working for a living.
With the easy access to high quality printers, Photo Shop graphic software and other sophisticated graphic and software programs, detection of counterfeit physical checks in nearly impossible. Criminals know how to work the system and will phish bank account and balance information as well as check detail routing, account and check sequence numbers.
Most businesses have no systems or means in place to detect check fraud other than by manual means. Since issuing checks are the main means for settling B2B accounts, procedures and safeguards for preventing fraud can be helpful.
Fraud Prevention Safeguards
Positive Pay process policies are mandatory for certain banks and companies. This type of process matches and confirms check number, check dated, check amount and payee name.
This halts thieves who adulterate checks or intercept information in route by an approval/verification process that acts like a firewall. Heading off fraudulent conveyance should take place within an hour with a simple e-mail that gives authorization to the release of the check. This completely protects a company from stolen account numbers on blank checks as well as altered check amounts.
Companies can produce Positive Pay files on their own or they can use a bank or private provider. Positive Pay software needs to take into account the specific format their bank requires. Secure transmission capabilities virtually eliminate any opportunity for anyone to commit check fraud.
Becoming a participant in your bank’s Positive Pay program may make a lot of sense. Software programs create a cost-effective and excellent solution they will alleviate any fear of someone drawing against your account with forged checks.
Uniform check stock selection is another sound practice where your company maintains tight check security with strict lock and key procedures for checks, signature stamps, cancelled checks as well as reorder forms. Anytime there is a closed account, all unused checks need to be immediately destroyed.
Using high-security check stock that may incorporate watermarks, warning bands, micro-printing features, chemical sensitivity that will smudge erasures, Padlock Icons, security screened backers, thermo fraud warning box, voidable graphics and other security features. Use a uniform check stock and avoid multiple styles, colors, size formats since they make counterfeit detection more difficult.
If you type your checks individually, use 12-point font or larger since forgers find it easier to erase small print and replace it with larger print to camouflage detection. Also, if you’re using a self-correcting polymer ribbon, replace it with a security fabric, single-strike ribbon. This way what is typed is not easily removable with tape.
Using multiple passwords that you can track to those responsible when it comes to the issuance and printing of laser checks is a sensible safeguard. Also, with laser checks you’ll want to use check paper that will permanently bond the ink toner into the paper.
Reconcile your checking account statements quickly when they arrive. Quick detection greatly increases the chance of recovery. If you have multiple employees who handle accounts payable, separate the responsibilities so that the reconciler is not the signer. Those handling the checks and reconciling the statements should not be the same, and, limiting the number of official signers. Conduct random audits as a policy discipline. Also, use background investigations when hiring prospective employees that are involved with your financial and accounting sector.
When issuing large denominations, limit authorization personal by using a maximum amount. By separating accounts of larger dollar denomination payments, you keep possible fraud losses at a lower denomination level.
Using good judgment is key to eliminating any chance of fraud. That being said, most businesses do not uncover fraud when it happens. Results from a recent survey conducted by the Faces of Fraud Survey Results, report that 76% of businesses learn of a perpetrated fraud from their customers and do not uncover the fraud internally; it usually takes a whistle-blower to make it happen.
Visual Cues for Counterfeit Identification
Check for a dull MICR line that is non-reflective and check for perforations. Most forgers don't go all out to use magnetic ink and will often substitute regular ink. Real magnetic ink will appear glossy and have a shine to it. Banks will reject legitimate checks when they have unreadable MICR lines and it takes extra time to process the check which works in the forgers favor. Also, most checks have a perforated edge. If your check stock has a perforated edge, an imposter check would lack this feature.
The routing numbers may be changed to buy more time for the thief to gain extra time for himself/herself to escape detection. The 9 digit number on the bottom of the check identifies the bank that the check is being drawn against. The first two digits identify which of the 12 Federal Reserve Districts that the bank is located in. Changing the routing number to an incorrect Federal Reserve Bank buys extra time that works in favor of the forger to distance himself/herself with your funds.
Ordering Business Check Safeguards
When ordering your checks from your check printer, they usually have the highest security in place with encrypted SSL security. Double verification and ID lock prevent unauthorized access. Secure servers and hacker safe certified Internet security tests ensure total privacy and confidentiality.
They will use your bank routing number and account number and verify that the actual account exists. Credit card verification further verify addresses and ship to address location in lieu of non-physical locations such as post office boxes.
Professional but Cheap Business Checks
When ordering checks, companies should consider ordering online where a variety of business check designs, vouchers, formats, special lettering styles can be utilized for one’s check stock. Ordering online will save one upward of fifty percent when compared to ordering from a bank or financial institution.
For emergencies, many online check printing companies offer 24 hour delivery through in house expedited shipping. These services cover laser, inkjet and manual checks as well as other package bundles.
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