Safeguarding Your Business with Check Fraud Prevention

Check fraud is the most prevalent form of payments fraud according to the recent Association of FinancialProfessionals (AFP) Payments Fraud and Control Survey Report, with 65% of organizations saying they were victims of check fraud in 2023. Understanding the implications of check fraud and implementing proactive solutions are crucial for safeguarding your business.

What is check fraud?

Check fraud can include various deceptive practices, including forgery, alteration, and counterfeit checks. For example, a business owner might issue a legitimate check to pay for goods or services, only to discover later that thecheck was altered and unauthorized funds were withdrawn from the business’s bank account.

How to prevent check fraud

One effective tool for combating check fraud is Positive Pay. Offered by many banks including Valley Bank, Positive Pay enables businesses to cross-reference incoming checks against a pre-approved list and automatically flags anypotentially unauthorized checks. To be effective, you should regularly update your list of approved checks and review transaction alerts promptly.

Payee Positive Pay is another tool businesses can use to help reduce the risk of unauthorized check payments onbusiness accounts. It compares the payee name on the check issue file to the payee name to simplify the reconciliation process. Both Check Positive Pay and Payee Positive Pay allow users to submit issue files, view exceptions, make payment decisions, access reporting, and receive email and text alerts about suspectedunauthorized check activity.

By adopting a proactive, multi-layered approach, businesses can gain more confidence in their fraud prevention strategy. Consider implementing these anti-fraud measures:

Reconcile accounts regularly. This can include reviewing monthly statements and other internal accountingcontrols to prevent errors and detect discrepancies.
Educate employees on fraud prevention techniques. Train your teams to look for signs of alteration or forgery, such as discrepancies in handwriting, missing information, or unusual paper
Implement secure check issuance You should consider requiring two authorized employeesto approve and sign checks to prevent unauthorized payments.

Avoid check writing if possible

The most effective way to prevent check fraud is to write fewer checks. Alternative methods such as credit cards, ACH, wire, and electronic checks should be considered. These methods offer several benefits over traditional checks, including enhanced security features, faster processing times, reduced administrative costs, and improved record-keeping capabilities. Additionally, these alternative payment methods are less susceptible to fraud schemescommonly associated with paper checks. While no method is 100% fraud proof, you can minimize your risk by usingsmart solutions for making payments.

Steps to take if you experience check fraud

If your business falls victim to check fraud, a quick response is crucial. Immediate steps to take include:

Keep records of all fraudulent checks, including check numbers, dates, and amounts.
Notify your bank immediately to freeze accounts if
File a police
Inform other relevant parties, such as your insurance (*If you don’t have fraud insurance, consider asking your broker about it.)
Closely monitor accounts for any further suspicious

In the event of fraud, it’s critical to continue proactive anti-fraud measures. Ongoing vigilance includes maintaining astrong relationship with your bank to address evolving fraud risks. Banks play a pivotal role in preventing and addressing check fraud by offering the tools, resources, and expertise to help businesses protect their assets. Businesses must do their part as well. This includes evaluating internal procedures related to financial transactionsand strengthening controls.

A proactive stance is key to protect against the devastating consequences of check fraud. Take action and work with your bank to ensure the continued success and security of your business.

For informational/educational purposes only. This content is intended to help businesses to mitigate against check fraud and not to provide a comprehensive list of best practices to prevent check fraud

Valley National Bank is a regional bank with nearly $64 billion in assets. Valley operates many convenient branch locations and commercial banking offices across New Jersey, New York, Florida, Alabama, California, and Illinois and is committed to providing the most convenient service, the latest innovations and an experienced and knowledgeable team dedicated to meeting customer needs. To learn more about Valley, go to valley.com.