What
is Check Fraud?
Check fraud is one of the largest challenges facing the real
estate industry today. With the advancement of computer technology
it increasingly easy for criminals, either independently or
in organized gangs, to manipulate checks in such a way as to
deceive innocent victims expecting value in exchange for their
money.
A significant amount of check fraud is due to counterfeiting
through desktop publishing and copying to create or duplicate
an actual financial document, as well as chemical alteration,
which consists of removing some or all of the information and
manipulating it to the benefit of the criminal.
Types
of Check Fraud:
Forgery
For
a law firm or a title company, forgery typically takes place
when an employee issues a check without proper authorization.
Criminals will also steal a check, endorse it and present for
payment at a retail location or at the bank teller window, probably
using bogus personal identification.
Counterfeiting and Alteration
Counterfeiting can either mean wholly fabricating a check --using
readily available desktop publishing equipment consisting of
a personal computer, scanner, sophisticated software and high-grade
laser printer -- or simply duplicating a check with advanced
color photocopiers.
Check Fraud Tips
Businesses as Check Fraud Victims
It is widely believed that businesses are the primary targets
of check fraud professionals - especially by organized rings
of criminals. As far as counterfeiting and alteration, payroll
checks appear to be a favorite although all forms of business
checks are targets from time to time and all forms of fraud
techniques are practiced as well.
A combination of precautions that a business might undertake
could greatly reduce the likelihood of check fraud. Poor internal
controls may lead to collusion between employees or third parties
who copy, steal, alter and forge checks.
Issuing and Reconciling Checks
- Assign
accounts payable functions to more than one person and make
each one responsible for different payment areas. This division
of responsibility makes it more difficult for employees to
tamper with checks and payments.
- Limit
the number of official signers. The fewer check signers you
have, the lower your chances are of being defrauded.
- Require
more than one signature on large dollar check amounts. In
this way, any losses you may incur will be low denominations
only.
- Separate
the check writing and account reconcilement functions. Try
not to have the same person who disburses files balance the
bank statement. This provides greater safeguards against an
employee writing fraudulent checks and covering it up. The
reconciler would be able to prevent the crime.
- Reconcile
your account promptly and regularly by using Positively Balanced,
LLC -- quick fraud detection increases the likelihood of recovery.
Businesses and personal consumers who do not balance their
accounts monthly and don’t find the discrepancies until
months have passed, can become liable for losses.
Call
us, we can help.
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Fraud
Prevention Services (provided by the bank)
- Use
Positive Pay. This type of payment system records pertinent
information about each check such as the amount, the check
number, bank information and date, and then transmits it to
the bank to be verified, before the check can be paid.
- Issue
an ACH block on all Escrow Accounts. This will prevent anyone
calling up and paying “their bills” by using your
account number such as cable, utilities, car payments, etc.
via check by phone process.
Employee
Relations Policies
- Make
sure you know who you are hiring to handle your money. Diligent
reference and background investigations on all prospective
employees are important so you know that you are not hiring
someone with a past record of financial abuse.
- Conduct
monthly reconciliations on all accounts and review closing
files randomly and enforce vacation policies.
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