Check Fraud, You Could Be Liable If...

Check Fraud, You Could Be Liable If... You do not protect your negotiable checks by using ordinary care. In the early 1990's the Uniform Commercial Codes or UCC had modifications to the codes that placed the business owner in a position where a bank was no longer the sole responsible party should check fraud occur. If it is determined that the bank did everything they could to prevent fraud loss and the business owner failed to protect themselves, the loss is the responsibility of the business owner. In addition to the financial loss from the check fraud, there is the additional loss of time investigating the crime, damage to your credibility and worry over where you go to gain a higher degree of protection. A Billion Dollar Problem and Growing Check fraud is a growing (illegal) business and is expected to continue to grow in this decade. With 1.2 million checks a day entering the Federal Reserve System that are fraudulent out of the 13 million checks deposited daily, the percentage chance for a business to suffer a fraud loss are staggering. The dollar loss for businesses is estimated to range from 18 to 20 billion dollars a year. Those responsible for these losses range from a small core of professional check fraud criminals to a larger group of gifted amateurs who have harnessed the power of inexpensive computer technology to perpetuate these crimes. Are You a Target for Check Fraud? The list of companies that are a target for check fraud is endless, but there are certain types of situations where check fraud artists are looking to separate the unsuspecting from their money: • Checks that are easy to copy, reproduce or alter (those without document security present) and checks that look like everyone else’s checks. • Easy access to pre-printed checks that are not locked up or accounted for in an office. • High volume bank accounts where fraudulent checks can easily slip through your system. • Check runs that are canceled, but the printed checks from those runs are dumped in the trash and not shredded. Is It Possible to Protect My Company? Yes, you can reduce the chance of someone counterfeiting (copying) or committing an alteration (forgery) of your checks, as well as reducing your liability if a check fraud occurs. There is not a 100% foolproof system that exists to prevent fraud, but you can significantly minimize the risk of check fraud by using a multi-prong approach. The critical requirement is to have set procedures in place for preprocessing and post-processing of your completed check handling and to use security check stock that is unique and is not easy to alter or reproduce. • Restrict access to the pre-printed checks you store in your offices. Ensure only trusted employees have access to any checks and checking accounts the company maintains. • Audit your checks. Know where your checks are; make sure preprinted checks are kept in numerical sequence. • Use custom designs on your checks or check stock and include multiple layers of document security features now available in the marketplace. • Advise your bank branch that holds your account of the security features that you have present on your checks or check stock. Keep a copy of the letter you send to the bank. Suggested format letters are available from us - just request them. • Reconcile your bank statement promptly (don't wait 30 days from the mailing of the statement package from your bank). Report any discrepancies immediately to your bank. Have your bank statement mailed to your home for your review before you bring it into the office for the person who does the reconciliation. • Insure any checks you put in the mail are in an envelope that has a protective security tint inside, place the mail in a letter drop box or hand it to a U.S. Postal mail carrier. Do not put envelopes that contain checks in any type of tray that is set beside any drop box on a street, parking area or pedestrian walk area. The Best Bet for Protection Don’t take any chances. Handle your checks like the cash they are intended to become when you send them out. It is always better to have more security than you need rather than needing security when a check fraud issue arises and not having enough features or worse, not features at all.

This article is presented by Dick Gray, a Certified Document Consultant with thirty-eight years of experience from the business printing industry and recognized expert on business checks and check processing as well as President of Xtension Technologies, Inc. in Lake Forest, California. Mr. Gray may be reached at dick@x-techinc.com or 1-877-642-7245 with questions or concerns you have on document security and check handling. Further information is available at www.x-techinc.com the web site for Xtension Technologies, Inc.