Prevent Check Fraud, Gain Efficiency

BY: Sam Huntington

For many years, we have been told by business analysts that paper checks would go the way of the typewriter, replaced by electronic payments and other more efficient ways to settle transactions. Clearly, this has yet to happen. In fact, checks are still the most popular payment method for transactions among U.S. businesses, according to a 2019 study by the Association or Financial Professionals.

Unfortunately, the lack of mass migration to a more secure payment system has not gone unnoticed by criminals. Check fraud accounts for more deposit account losses – $1.3 billion in 2018 – than any other payment method, according to the American Bankers Association.

In addition to the fraud losses from checks, other payment fraud can be attributed to the widespread use of checks. Anyone who sees a check has all the information (account type, routing number, account number, business name) they need to create a fraudulent Automated Clearing House (ACH) entry and attempt a debit transaction to take funds from the check payor.

In a high-tech world, most check fraud is decidedly low-tech. Stealing checks from mailboxes, using cleaning fluid to alter payment information, and creating counterfeit checks from paper stock are all popular – and, unfortunately, effective – ways to steal.

Our bank’s Treasury Management team has a few suggestions for businesses to avoid becoming victims of check fraud: 

  1. Talk to us about originating ACH payments. The ACH Network has many controls and mature security processes that make it a safe way to send and receive funds. In addition to being less expensive, ACH is more efficient (e.g., it's affected by U.S. Postal Service delivery delays), and can help you accelerate your collections, improve cash flow, and allow you to take advantage of trade discounts. To take payments from the accounts of your customers, you’ll need their written consent. We would be more than happy to talk to you about how to show your trading partners the benefits of ACH.
  2. Use proven fraud mitigation tools, such as Positive Pay and ACH Filter, to verify every payment leaving your account. These services check all presentments against a whitelist you create, and notify you of any payment attempt that doesn’t match the criteria on your list. Positive Pay even uses optical character recognition software, to read the payee line on checks you issue to guard against check alterations.  
  3. Look at your account every business day. State Bank of Cross Plains’ business clients have access to transaction data in real time, so they can verify transactions as they arrive. The required time to report and return fraudulent payments is much shorter for business accounts than for consumers, so you want to identify any exceptions and act as soon as you can.
If you are looking for another reason to reduce your business’s dependency on paper checks, you might find it in your vision for your business. With few exceptions, larger companies and those successfully managing their growth are much more likely to use ACH payments than checks, and the reverse is often true of smaller businesses. High-performing organizations have identified ways to be more efficient and manage their risks, and payment systems are a great place to start.

Please feel free to reach out to me (608) 826-3516 today, to find out more about how State Bank of Cross Plains can help your business maximize its potential.

Sam Huntington

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