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Preventative Measures to Mitigate Check Fraud for Suppliers

  • Media Financial Management hosted a webinar focused on check fraud
  • They covered in detail fraud methods and prevention
  • Check fraud continues to rise

Business checks are a prized commodity when it comes to check fraud, as 81% of businesses still pay other firms with checks. This presents a major opportunity for fraudsters -- made clear as business checks are sold for $250+ on the dark web vs. $175 for personal checks.

The reasons are simple:

  • Business checking accounts typically hold more funds
  • Businesses write more checks, making it more difficult to identify a fraudulent check payment
  • Altering a business check only requires minor modifications like adding "& NAME" on the payee vs. washing the entire payee and amounts
check envelope reduced

One industry that handles more check payments than most is suppliers. The payment process between suppliers and their customers has seen little change over the past few decades, and the old adage "if it ain't broke, don't fix it" applies directly here.

Unfortunately, this makes the supplier industry a major target for check fraud.

Understanding the Check Fraud Landscape

Recently, the Media Financial Management Association hosted a Town Hall Webinar, focusing on check fraud preventative tactics for suppliers.

Dallen Anderson, Senior Director of Fraud Detection and Prevention at AvidXchange, offered a shocking stat from the FBI:

The FBI states more than 70% of businesses each year report some type of check fraud, which resulted in over $18 Billion in check fraud cases in 2022 alone.

He also pointed out that today's check fraud criminals are not small operations; rather, "they are sophisticated criminal operations, with participants infiltrating post office distribution centers, setting up fake businesses or creating fake IDs to deposit the check."

Preventative Measures to Mitigate Check Fraud

Mr. Anderson provides attendees with ways to proactively mitigate check fraud opportunities for fraudsters, including:

  • Locking up checks in safe, secure locations with limited access
  • Mark up and hold onto voided checks
  • Strengthen internal processes and assign different parties for issuing checks, signing checks, and reconciling payments
  • Perform a payment reconciliation at least once a month

Lastly, Mr. Anderson reiterates the importance for businesses to utilize a positive pay system. We recommend that businesses take it one-step further and ensure that they are using a payee positive pay system that extracts the payee name to compare with the issue file, to provide an additional level of security.

Financial institutions need to be a partner with businesses in the fight against check fraud. FIs can alleviate the burden of check fraud for their business customers by deploying both a behavioral analytics system to monitor transactions for anomalous behaviors and image forensic AI to analyze the images of checks for counterfeits, forgeries, and alterations.

With businesses remaining vigilant and FIs utilizing the latest innovations, both parties can ensure that funds are safe and secure.

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