There’s good news and bad news about check fraud. First, the good news: The incidence of check fraud has slowed and the percentage of companies that experienced check fraud in 2012 reached its lowest level since 2004.
The bad news: The level of fraudulent activity remains high and the threats continue to challenge treasury staffs. Sixty-one percent of organizations that responded to the annual AFP check fraud survey experienced actual or attempted check fraud in 2012.
As in the past, checks remain the primary target of criminals committing check fraud.
Counterfeit checks with the organization’s MICR line data were the most frequently attempted form of check fraud, followed by payee name alteration on checks issued, counterfeit checks with the organization’s name drawn on fake or another company’s account information and dollar amount alteration on checks issued.*
Take steps to prevent check fraud
Thanks to effective fraud detection and controls, nearly three-quarters of organizations that were victims of actual and/or attempted check fraud in 2012 experienced no financial loss from the fraud. Among the other quarter, the typical loss was $20,300. Checks were the payment method that accounted for the greatest financial loss as a result of fraud.
A variety of tools, policies and procedures can help you protect your organization from the financial consequences of being a target of check fraud.
Use positive pay, which reconciles checks presented for payment against a file of checks issued by your organization. You have the ability to make pay or return decisions on checks flagged as exceptions — checks presented that do not match your issued check file. This is your best defense against counterfeit checks.
Conduct daily account reconciliation. Early detection of unauthorized activity is critical.
Implement internal controls. Following specific policies and procedures within your organization can provide significant roadblocks to fraud:
- Convert as many check as possible to electronic delivery.
- Implement dual controls over initiation and approval of check.
- Set up balance and transactional alerts so that you are aware of any activity outside the ‘norm’ for your organization.
- Maintain separate accounts for different purposes. For instance, you may want to segregate disbursements from collections, payroll from accounts payable, or have separate accounts for checks, wire transfers, ACH debit check and card check.
- Use high-quality check stock with built-in security features, and purchase it from known vendors. Develop policies on how check stock is ordered and delivered. Store check stock securely.
- Use secure financial document destruction processes.
Keep your guard up
You may not be able to prevent your organization from being targeted by criminals, but by thoughtfully employing fraud detection and control systems, you may be able to prevent or limit financial losses from fraud. Horizon Bank can help you stay up-to-date on new threats and new solutions. Contact your Horizon business banker or call us at 888-873-2634.