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Jun 21Tim McLellan

Combating Check Fraud

Jun 21Tim McLellan

I always say that you can make mistakes 100 times faster with a computer that you could in the BC (before computer) age.  You can also commit fraud 100 times faster.  I hate to say it, but most of my clients experience some type of check fraud at least once a year.  So if you think there is no check fraud against your company, you probably aren’t looking hard enough!

 All of the information needed to create a fraudulent check against your bank account is included on each check that you issue.  Your Company’s name and address, bank name, bank routing number, and check number is all that is needed to prepare a fraudulent check.  Desktop publishing software allows criminals to pretty easily prepare a fraudulent check. 

Here are a few examples of what I have seen in the past 12 months:

 Fraudulent check for $212,000 was attempted to be paid against one client’s account.  After this check was rejected, the thieves still attempted to pay several credit card bills through the same account by giving their credit card company my client’s bank routing number and account number.

 Accounts payable checks had been placed in an unsecured mailbox and all 40 checks were stolen.  The payee name on a $132,000 check was altered and cashed before reaching the correct party.   It took my client 30 days working with the intended payee to assure the bank that the check was not cashed by the correct party.

 Another client typically prepared checks in the middle of the afternoon.  These checks were placed in a wire basket near the front door until the mailman came at 10am the following morning.  Several people were in and out of the building while checks were in the basket, including the evening cleaning crew.  There were a handful of small fraudulent checks that were attempted to be cashed against the account. 

 Here is what you can do to prevent these events in your company:

 Use Positive Pay Service provided by your bank.  Each time you write checks you send a list of the payee, amount, and check number to your bank.  Your bank will only post checks against your account that match the list you submitted.  In the above example, that prevented the $212,000 check from being posted against my clients account.

 Pay as many vendors and employees as possible through direct deposit or ACH transfer.   Several software packages allow you to enter your vendor’s bank information into your system and allow you to initiate the ACH transaction.   This also prevents checks from getting lost in the mail.

 Speaking of mail, never place checks in an unsecured mailbox.

 Monitor your bank account via the internet at least once a week.

 Most important of all, reconcile your bank account within a couple days of receiving your bank statement each month.  Most banks will not reimburse you for a fraudulent transaction unless you report it on a timely basis.

 And by the way, any of the above can happen with your personal checking account.   If you need more information, please contact me.

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