Ways to Avoid Check Fraud

A lot of money is lost every year due to bad checks. Nearly half of the losses are attributed to check fraud. In most cases the fraud happens due to negligence or ignorance on the part of those processing the checks.

Most businesses depend on check verification, check guarantee, and collection services to combat fraud. However, the best way to fight check fraud is to come up with measures or policies that prevent the acceptance of fraudulent checks.

Sometimes people fail to pay attention to details while handling checks. Fraudsters take advantage of such individuals to present fake checks to banks or use them in paying for products.

Below are 6 ways to avoid check fraud:

Formulate a check acceptance policy

This is one of the best ways to deal with check fraud. Create policies that ensure only valid and verifiable checks are accepted. The problem is that sometimes businesses create such policies but never follow them consistently.

The policy should clearly define the acceptable form of identification, mandatory information that should accompany the checks, and the restricted amount a check can be written.

However, you should note that several states have laws that prohibit check acceptance policies that demand a card number to be on the check.

Get ID

A cashier or anyone receiving the check should confirm that all important details about the customer such as name, address, and phone number are on the check. They should also verify that that information matches the ones on their ID.

It is also important to be certain of the numerical figure shown on the corresponding check. In case a bank accepts to process the check containing different amounts, the written amounts will automatically override the numerical figure.

Check security features

All checks have unique security features aimed at increasing the level of security. Ensure that you carefully observe these features before accepting the check. Here are some of the common features:

• Watermarks

• Copy void pantograph

• Chemical voids

• Security inks

These are just a few of the features you will find in a check. If you don’t handle the checks directly, then you should ensure that your employees are trained on how to identify the above security features.

Avoid accepting second-hand or third-party checks

According to a recent survey, only one percent of all checks written annually bounce. A third of the check fraud emanates from closed accounts and what’s known as check kiting – a new system commonly used as a payment method in the service industry.

The other 27 percent is as a result of counterfeit checks, forgery accounts for 24 percent, bankruptcy 12 percent while five percent is due to other reasons.

Restaurants and business owners in the hospitality industry are also at a higher risk when it comes to check fraud. Another group that faces a high risk are merchants in the electronic business.

Balance your checkbook on a monthly basis

This is something that many people ignore. Although it may sound to be a lot of work, doing it can save you from a lot of trouble. It is estimated that more than 50 percent of Americans don’t reconcile their checkbooks.

There’s a law that gives you up to 30 days to check and report any issues that appear in your bank statement. If you fail to do so, the bank is not obligated to pay you.

Positive pay

This is another measure that you can implement to prevent check fraud. It is an agreement between a business and a bank to work together in detecting fraud. This is done by scrutinizing all items sent for payment that a business didn’t issue.