How to Prevent Check Fraud: 8 Best Practices for Organizations
Check fraud is a serious crime that can cost organizations millions of dollars in losses and damages. It involves altering, counterfeiting, or stealing checks and using them to make unauthorized payments. To prevent check fraud, organizations need to implement effective security measures and best practices that can deter, detect, and report fraudulent activities. Here our eight tips from our Fidelity / Crime team that can help you reduce the risk of check forgery and protect your financial assets:
- Avoid using community mailboxes to mail checks. Instead, go to the post office or use mailboxes in locations with restricted access. Send larger checks by registered mail.
- Use a positive pay system or reserve a positive pay system, expedited return information, Payee Match, or signature verification systems to protect your accounts payables and accounts receivables.
- Purchase checks that include good security features, such as chemical voids that will void the check if a chemical is used on the paper and security ink that will distort if chemicals touch the check.
- Use dark “indelible” ink to write checks that can’t be easily erased or covered, such as black gel inks, archival ink, or oil-based ink.
- Review your bank statements frequently to spot inconsistencies. Most banks only allow 60 days to report fraud. Know your banks liability and policies.
- Have two individuals review checks to mitigate alterations. Use surprise audits and look for any disbursement or deposit irregularities.
- Consider having different accounts for different functions. For example, one for payroll, one for accounts payable, check issuance, etc., for easier reconciliation.
- Follow up with vendors to see if payments have been received.
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