Prevent Business Check Fraud

Types of Check Fraud

Check fraud manifests in three main types: front-of-check fraud, back-of-check fraud, and mobile deposit fraud. Front-of-check fraud involves counterfeit and altered checks, while back-of-check fraud encompasses forged, missing, or improperly endorsed checks. Combatting check fraud is challenging due to its ease of execution. Intercepting a single check grants a fraudster access to your checking and routing numbers—everything needed to create counterfeits.
 

• Altered Checks: A criminal modifies the name or payment amount before depositing a check. They take advantage of either improperly completed date, payee or amount, or by “washing” the check of ink and re-writing the information.
   
• Counterfeit Checks: Checking account and routing numbers, along with the signer’s name and signature style is acquired. The criminal then uses desktop publishing software and a printer to forge counterfeit checks.
   
• Improper Endorsements: A criminal forges the endorsement on the back of a check and deposits it at a financial institution. Alternatively, they may not endorse the check at all, or one party might improperly endorse a check made payable to two parties. The dishonored check initiates a potentially lengthy and costly claims process to determine liability for the funds involving the banks, the company that issued the check and the intended payee.
   
• Mobile Deposit Fraud: A recipient deposits a check using mobile check deposit on their smartphone, then they take the check to another bank or check cashing store to receive payment. Several days later, the paper check is presented to the issuing bank where it is flagged and dishonored as a duplicate. 

Reporting and Recovery

Strict reporting windows apply to check fraud. Notification requirements can be found in the terms and conditions disclosure provided with the relevant account, and may vary by bank. However, recovery of funds lost to fraud is not guaranteed, and the process can take 90 to 120 business days or more.

Fraud Protection Measures

 
Switch to Electronic Payments

Consider transitioning to electronic payments for increased security and efficiency. ACH and wire transfers reduce the risk of check fraud, providing faster, more secure transactions. Embracing electronic payments enhances financial security and operational efficiency.
 

Positive Pay Controls

This service detects business check fraud by verifying check numbers and payment amounts of incoming items against a file that is provided to the bank. The system also has the ability to compare payee names for additional verification. With Positive Pay, the customer sets parameters for payment and monitors their own exceptions. Learn more about Peoples Bank Positive Pay.
 

Check Writing Security

If you must write and mail checks, use these best practices:

• Order checks directly from the bank for enhanced security features.
• Use a gel pen instead of ballpoint; the ink in a gel pen permeates fibers on the check making it more difficult to alter by washing.
• If you mail a check, walk into the post office and drop it in the lobby mail slot or hand it to a postal worker. If you have to use a blue box, drop the check in before the day’s last scheduled pickup so it doesn’t sit in the box overnight. Don’t put checks in your home mailbox for pickup and raise the flag to alert carriers, which signals to potential thieves that there’s something inside.
• Monitor your bank account online regularly to confirm checks have been cashed and see if anything else seems suspicious.
• If you are expecting a check or other important mail, consider using the Postal Service’s free Informed Delivery service which allows you to get a preview of mail expected to arrive soon. Sign up at https://www.usps.com/manage/informed-delivery.htm.

Next Steps

Regularly review your accounts for signs of suspicious activity, reconcile payments, and verify transactions. Implement safeguards like Positive Pay with Payee Name Verification for business accounts issuing checks.

Remember, when in doubt, take action. It’s better to question a legitimate transaction now than to try and recover funds lost to check fraud later. Make informed choices and protect yourself against this prevalent financial threat.