Tips to Help Customers Avoid Check Fraud

We live in an increasingly digital world, but sadly that doesn’t mean check fraud is a thing of the past. Fraudulent checks remain a persistent threat, and they can be a costly and disruptive problem for businesses of all sizes. As a business owner, it’s important to stay alert and take steps to prevent check fraud. 

Understanding Check Fraud

People exploit weaknesses in check processing systems in a number of ways. Some write bad checks to others or forge signatures on checks made out to themselves. Others steal checks from the mail and alter them. As technologies advance, criminals continually find new ways to target businesses through fraudulence. However, with vigilance and the right strategies, you can significantly reduce your risk. Here are some practical tips for keeping your business safe from check fraud.

Implement Strong Internal Controls

Check Signatures

Only use authorized personnel to sign checks. Designate a limited number of individuals who have the authority to sign checks and maintain a record of their signatures.

Check Issuance Policies

Create a clear, documented check issuance policy. This should outline the steps for issuing checks, including the verification process and approval hierarchy. 

Positive Pay

Consider enrolling in a positive pay program with your bank. This service cross-verifies the checks you’ve issued against the ones being presented for payment, allowing you to spot discrepancies quickly.

Watermark Paper

Make sure your checks are printed on high-quality check paper with built-in security features like watermarks, microprinting, and chemical sensitivity. These make it harder for criminals to counterfeit your checks.

Prioritize Employee Training and Awareness

Team Education

Regularly train your employees to recognize signs of check fraud. They should be familiar with the latest fraud trends and understand the importance of safeguarding the company’s finances.

Whistleblower Policies

Encourage your employees to report any suspicious activities related to check issuance or receipt. Ensure they are aware of the company’s whistleblower policies and provide them with a secure and anonymous channel for reporting.

Secure Your Business’ Check Storage

Lock and Key

Store your blank check stock, signature stamps, and other sensitive materials securely. Limit access to only authorized personnel. 

Timely Reconciliation

Be sure to reconcile your accounts regularly. Promptly investigate any discrepancies you may find.

Shred Unused Checks

When you no longer need a batch of checks, destroy them securely. Shredding is the most effective way to prevent stolen checks from being misused.

Use Secure Payment Methods

Electronic Payments

Consider shifting from paper checks to electronic payments wherever possible. Electronic fund transfers can be more secure and leave fewer opportunities for fraud.

ACH Filters and Blocks

Implement ACH (Automated Clearing House) filters and blocks to restrict unauthorized debits from your account.

Dual Verification

Require dual verification (also called multi-signature) for larger transactions. Such a verification requires two authorized signatories to approve a payment over a certain amount.

Take Action Now

Don’t wait until fraud strikes! Take action now to protect your business assets from check fraud criminals. If you would like to learn more about how to safeguard your business against financial threats, call SIA Insurance Group. We are an Illinois business insurance company and we take our job very seriously to provide the businesses we serve with the best protection possible. You can reach us at 630-325-4000.