Fake check scams on the rise – how to protect your business

Did you know that business check fraud is the number one form of payment fraud and affects 74% of organizations?1

Business check fraud is a legitimate risk to any small business, enterprise organization, or financial institution writing checks. Yet, most businesses do not have the proper solutions in place for check fraud prevention.

By the numbers:

  • 95% of business leaders state that checks are their number one choice for making payments2
  • 75% of organizations report that when they are victims of fraud or attacks it’s due to check fraud3
  • 51% of companies’ payments made from a business to another business are made by check3

While technology has been beneficial in mitigating certain financial crimes, criminals easily adapt to the changing technology landscape and are innovative in their tactics to commit fraud. Check fraud, despite being one of the oldest forms of payment fraud, remains a serious risk to small and large companies; therefore it’s imperative to have the right guards in place to protect against it.

Ulises Pineda, Fraud Officer, SVB Private Financial Intelligence Unit

Steps to protect your business

74% of organizations use Positive Pay to guard their business against check fraud, Often cited as the best defense against check fraud, Positive Pay is an advanced, web-based security tool that can help your business mitigate check fraud to prevent financial losses. If the date, check number, payee, or dollar amount of any checks issued do not match with checks presented for payment, an exception is created and an alert is sent via email. The organization can either authorize the red-flagged payment or have the check returned.

Daily reconciliation of accounts: Review on a daily basis for inconsistencies via Business Online Banking. Once a bad check has been passed, fraudsters often repeat the process at the same company because they recognize its vulnerabilities. Performing daily reconciliation of accounts can substantially reduce the risk of check fraud by verifying the status of payments and highlighting anomalies quickly.

Business online banking alerts: Set up threshold alerts for transactions that exceed a set dollar amount.

Control access: Limit exposure to company accounts and systems.

Issue fewer checks: Consider migration from check payments to electronic payment products (ACH). ACH reconciliation is enabled by Positive Pay and filters all pre-authorized ACH transactions, notifying you if any unauthorized activity occurs.

Incorporate good check writing policies to prevent internal and external fraud by:

  • Separate the check writing and account reconcilement function
  • Limit access to check stock and maintain in a secure, locked area
  • Use check stock with fraud prevention security features

We also recommend contacting your insurance provider to consider additional protection.

The views expressed in the article are those of the author and/or person interviewed and do not necessarily reflect the views of Silicon Valley Bank, a division of First-Citizens Bank and First Citizens BancShares, Inc. The materials on this website are for informational purposes only, are subject to change and do not take into account your particular investment objective, financial situation or need. Since each client’s situation is unique, you should consult your financial advisor and/or tax planning professional before acting on any information provided herein.