With the ease and accessibility of today’s technology, fraudsters anywhere can replicate checks with ease. It’s no stretch, then, to say that it’s become easier than ever before to forge a check.
And it’s check fraud, with a whopping 77 percent of actual and attempted instances of fraud to make up a majority of fraud among companies.
Check forgery is one of the most familiar forms of payments fraud. It involves legitimate checks falsely imprinted with the payer’s signature. Counterfeit checks are also a tactic fraudsters use by digitally altering a document and printing it to appear as a genuine check.
The Association for Financial Professionals 2016 Payments Fraud and Control Survey states that, “after checks, wire transfers were the second most popular vehicle for payments fraud, with 48% of organizations exposed.”
Electronic fraud happens when ACH transactions or other digital transfers are initiated from an unauthorized source.
Positive Pay and Positive Payee: Positive Pay is a service banks provide to match the account number, check number, and dollar amount of each business’s check against a statement of checks previously issued by that business. It’s kind of like having fraud prevention insurance on each check.
A check that does not match the file a business provides to the bank is flagged as an exception and the business is notified for approval before it is released.
Payee Positive Pay works almost exactly like Positive Pay with one exception: the customer’s name (payee) is also matched on the statement file with the issued check.
Check Controls: Controlling who has physical access to unprinted check stock is of paramount importance to keeping the integrity of check payments intact. Check printing and handling provides a huge invitation for fraud, dependant on the existing controls in place to prevent it.
A world without checks would be ideal, yet, it’s still the most common form of payment for businesses. This is why restricting access to check stock is crucial. Applying physical locks on check stock cabinets with dual access provides a good level of accountability.
Physical Controls: One technique used by large organizations to prevent check fraud is to separate the signature plates from the check stock itself. This means two separate keyholders are required to produce a check.
Check Limits: Some Enterprise Resource Planning (ERP) programs have the ability to set a dollar-amount threshold for a check, flagging it for additional approval, before it’s sent along to the payee.
ACH debit block: This type of debit block prevents all transactions from posting except those that are previously authorized. There are specifications included in this feature for pre-approved recurring payments or maximum daily dollar amounts.
Debit filter: This filter screens ACH transactions to match only with pre-approved businesses. It’s similar to a bank’s Positive Pay services but specifically for ACH transactions. The filter ensures that ACH debits fulfill the right criteria against a list of approved vendors. Only transactions that meet all criteria are posted as successful transactions.
Reconciling bank statements within a 30-day window is a best practice in accounting departments. This allows for quick discovery of any suspiciously posted transactions.This step cannot be stressed enough for its importance in good fraud management.
Reconciling bank statements also reveals the following:
These control practices, used simultaneously, can do wonders for improving your payment process. It may even cause you to consider moving to an electronic payment process or to outsource a piece of your AP department. Most importantly, these practices will help shield you from accounts payable fraud.
