A guest post by by Kristine Lunde, Treasury Management Team Lead and Kim Lazur, Fraud Manager at Alerus
As electronic payments have become more prevalent over the last few years, businesses have understandably focused on fighting electronic fraud. But like a game of whack-a-mole, every time you knock down one kind of fraud attempt, a new one pops up.
Only this time the new one isn’t so new – in fact, it is the decidedly familiar and low-tech crime of check fraud that is rearing its head once again. After years of declining prevalence, check fraud increased in 2016 as 75 percent of organizations experienced the problem, according to the 2017 AFP Payments and Fraud Control Survey.
While cybercrimes steal the headlines – and the attention of business owners – scammers and fraudsters are reviving the simple, old-school tactics that make check fraud one of the easiest and most popular ways to steal money. Even in today’s world, where we tend to think that “everything happens online,” the truth is that there are billions of paper checks processed every year, providing ample opportunity for would-be fraudsters to take advantage.
Common Types of Check Fraud
Every business should be on the lookout for fraudulent checks. Here are a few of the more common techniques to watch for:
- Using stolen account information to print fraudulent checks: This type of check fraud doesn’t even require the use of your actual checks. All that is needed is your account number and routing number, which someone could obtain if your business checks are left lying out on a desk or other unsecure location. With those numbers in hand, a fraudster can simply go to an ordinary print shop and print out mass quantities of “checks” that display his or her name (or alias) but with your company’s account number and routing number on them.
- Chemical washes: Commonly known as check washing, this method involves using chemicals to remove ink/toner from the check so that new information can be printed. Checks are frequently taken out of the mail and then altered in this manner to change the payee or to make the check amount larger. For example, a $4,000 check to Jim Smith is washed and suddenly becomes a $400,000 check to John Doe, who happens to be a fraudster.
- Deposits of fraudulent checks: A business corresponds with a new customer via email or phone and a deal is reached to provide a product or service for a given price. The customer asks for wire transfer instructions. Instead of wiring money to the business, the fraudster mails a fraudulent check directly to the bank with instructions to deposit it into the business’ account. Once the check is deposited, the fraudster calls the business to complete the sale, ask for a refund, or simply cancels the deal. The goal is to obtain money from the business before the check is charged back.
- Photocopying: This age-old method takes advantage of how easy it is to make copies of checks. Such mass replication allows the person to submit the same “check” to multiple different banks for cashing.
Ways to Protect Against Business Check Fraud
With check fraud on the rise, it is important for business owners to take steps to protect their companies from fraud losses. Here are a few tips:
- Use electronic payments instead of mail: Despite the headlines, electronic payment methods are very secure and make your account much less vulnerable to fraud compared to sending checks through the mail. Intercepting checks in the mail is the easiest way for fraudsters to get the information they’re looking for.
- Sign up for e-statements: Sign up for your bank’s e-statement option, which keeps your statements – and the account information they contain – out of the mail.
- Keep checks in a secure location: Don’t leave checks on desks, in your car or in other places where they might be easily stolen.
- Consider fraud detection tools like Positive Pay: Purchasing a fraud detection tool can be seen as a form of insurance to help minimize losses that could be incurred from check fraud.
Business must be diligent when dealing with checks and, whenever possible, use electronic payment tools and electronic checks. Alerus’ fraud team can provide you with additional advice and solutions to aid your company’s efforts to avoid becoming the next check fraud statistic.
Kristine Lunde is the treasury management team lead at Alerus, a financial services firm offering banking, mortgage, retirement, and wealth management solutions for individuals and businesses. She and her team provide a range of commercial banking services to business customers across the country. In addition, she counsels customers on fraud prevention and works closely with those who have incurred fraud losses. Kristine can be reached via email email@example.com or by calling 701-795-2523.
Kim Lazur manages the Alerus fraud department. Her team leads the company’s fraud prevention and mitigation efforts, investigates fraud attempts, and seeks to identify fraud trends and patterns in order to minimize risk to customer accounts. She can be reached via email firstname.lastname@example.org or by phone at 701-795-3329.