Don't Become a Statistic: Protect Yourself from Check Fraud
Don’t Become a Statistic: Protect Yourself from Check Fraud
Payment fraud is insidious. It chips away at corporate profitability, jeopardizes your reputation, consumes staff time with remediation, and puts your business’ viability at risk. Businesses have too much at stake to leave themselves vulnerable to soaring payment fraud.
Paper checks represent the lion’s share of financial losses from payments fraud.
According to the 2022 Association for Financial Professionals Payments Fraud and Control survey1, 71 percent of organizations reported having been victims of payments fraud activity in 2021.
Organizations must remain vigilant against fraud. It’s more important than ever that business departments assess whether their payment methods protect them from a fraudulent attack. Skilled fraudsters can hijack the funds from all payment types but checks are more vulnerable to fraud because they contain valuable information that can be easily forged or stolen.
Industry experts say check fraud was up 106 percent because of the pandemic while check volumes only rose 8 percent2. Experts attribute several factors to the uptick in check fraud during the pandemic, including the end of stimulus checks, social media, new accounts scams, mail theft and aging technology3.
Did you know your current check processing is posing risks and exposing your AP payments to payment fraud risks? With internal and external threats on the rise, accounting teams have no time to lose in mitigating the risk of payment fraud, safeguarding sensitive banking information and ensuring the integrity of the accounting system. Electronic payment solutions, such as virtual cards and ACH transactions, provide greater protections than paper checks, mitigating the risk of payment fraud. Check out the on-demand webinar from MMA and Premium Associate Member Paymerang.
Nonetheless, check fraud is no new phenomenon. From 2016 to 2018, attempted check fraud nearly doubled to $15.1 billion and accounted for 60 percent of attempted fraud against deposit accounts at U.S. banks4. Further results from this study showed that successful check fraud made up 47 percent, or $1.3 billion, of banks’ fraud losses, up from $789 million in 2016.
Despite the risks, check remains the most popular payment method for business-to-business (B2B) payments and, as of 2020, 42 percent of companies used checks for B2B payments5.
Although there is always a risk of fraud when paying with a check, there are several ways to keep your organization safe:
- Lock your checks away: Keeping checks locked in a secure location makes it harder for them to end up in the hands of the wrong person.
- How you write the check matters: You should never write a check with a pencil because fraudsters can easily erase information, and it’s also important to consider the type of ink you use. Writing a check in pen is critical but the color and style of ink also matter. You should opt for a black gel pen instead of a ballpoint pen to prevent “check washing” or the removal of information from your check.
- Be diligent when writing a check: Always specify a recipient and fill out every section on a check to make sure fraudsters cannot fill out any additional information.
- Security envelopes: When mailing a check, security envelopes add an extra layer of protection by hiding sensitive information.
- Never mail a check from your business or home: One problem people face is that checks are being stolen once they are mailed and then cashed by a fraudster. Although it is more convenient to send a check directly from your business or home, dropping a check inside the Post Office is one way to lower the chances of a fraudster intercepting a check and cashing it. Even if they are locked, do not use outside mailboxes because thieves can break into them. If you cannot make it to the Post Office, handing a check directly to a mail carrier is the second-best way to avoid a fraudulent attack.
- Monitor your accounts and check for suspicious activity: After you mail a check, it is important to monitor bank accounts and report any suspicious activity.
- Utilize Positive Pay: Positive Pay is an automated cash-management service companies use to deter check fraud. Banks use Positive Pay to match the checks a company issues with those presented for payment. Any check considered suspect is sent back to the issuer for examination.
Payment fraud is always a concern for AP practitioners and labor shortages combined with heavy staff turnover within business and finance offices continue to add to that stress. Securing how you pay your vendors can alleviate some of that worry. In addition to saving your money by eliminating the costs associated with paper checks, automation solutions safeguard payments and helps keep bank accounts safe from fraud.
About the Author
Nasser Chanda leads Paymerang’s fast-growing organization and drives the company to provide best-in-class finance automation for the modern enterprise. He may be reached at 877-680-7332 or firstname.lastname@example.org.
Paymerang is an MMA Premium Associate Member and has been an MMA member company since April 2022. Visit online: paymerang.com.
- 2022 AFP: Payments Fraud and Control Survey
- Jake Emry, Nice Actimize Solutions fraud expert
- Frank on Fraud: Check Fraud is Booming Again in a Post-Pandemic US
- American Bankers Association’s 2019 Deposit Account Fraud Survey Report
- 2020 AFP Payments Fraud and Control and Control Survey