How to Prevent Check Fraud

While both check processing and check printing have become more secure over the years, there are still always risks associated with any type of financial transaction. Despite advancements in technology and security measures, fraudsters still adapt and find innovative ways to defraud individuals and businesses of their funds. Check fraud is one of the most prominent methods for this type of fraudulent activity. 

But what is check fraud exactly? And how could it impact my business or my own personal finances? Sadly, check fraud remains a common occurrence in today’s world. In fact, according to a 2015 Deposit Account Fraud Survey, roughly a third of total financial losses in the banking industry came from check fraud. 

Here, we’re taking a closer look at check fraud to understand how it occurs and how you can help prevent it. We also discuss why switching your payment processing needs to an outsourced firm can help secure your financial services. 

WHAT IS CHECK FRAUD?

Check fraud, simply enough, is when someone commits fraud by using a check. But what is fraud? This act is defined as intentionally depriving another person or business of money using deceptive or unfair practices. Check fraud can occur in a variety of different ways. Here are the most common and widespread types of check fraud:

1. Forgery.

Check forgery is when the drawer’s signature is unauthorized or when someone endorses a check not payable to the endorser.

2. Theft.

Theft is simply when someone steals a check or checkbook to use for fraudulent purposes.

3. Check kiting.

This advanced method of check fraud attempts to gain access to funds deposited in one bank account before the bank processes the funds from another account.

4. Check washing.

Some fraudsters use certain chemicals to remove information from a check, or “wash” the check, so they can then add new information.

5. Paper hanging.

This type of check fraud occurs when people write checks on closed accounts.

6. Check counterfeiting.

Some fraudsters will counterfeit, or illegally produce, checks with the victim’s financial information. 

HOW TO PREVENT CHECK FRAUD

While technology has increased the security of our financial processes, fraudsters continue to develop innovative and advanced methods for committing check fraud. Even the most secure institutions and processes are always at some risk of fraud. In fact, according to AARP, there were almost 1.7 million check fraud complaints issued in 2019 alone. Clearly, check fraud is still a major issue. 

But there are steps you can take to help prevent check fraud and keep your finances secure. Most of these methods are surprisingly simple and common sense. Here’s a look at some steps that anyone can take to reduce the risk of check fraud: 

  • Never leave blank spaces on the payee or amount lines.
  • Use dark ink that won’t be easily erased.
  • Never make a check payable to cash (if lost, anyone can deposit these checks).
  • Limit the amount of personal information you include on a check. Never include your social security number or driver’s license information.
  • Only accept personal checks during normal business hours so it’s easier to verify.
  • Keep your checks in a secure and locked area.
  • Following a transaction, never leave your receipt at the ATM.
  • Keep track of your checkbook and each check you’ve issued.
  • Wait to endorse a check until you’re ready to cash or deposit it.
  • Avoid mailing out checks at night (this is when check theft commonly occurs). Use the local post office instead. 

BENEFITS OF OUTSOURCING YOUR PAYMENT PROCESSING SERVICES

If you’re concerned about the potential risk of check fraud for your company, you should consider working with an outsourced payment processing firm. These professionals can improve the efficiency and security of your financial processes and even cut down on your overall operational costs in the long run. 

Perhaps the greatest benefit of outsourcing your payment processing is the cost advantage. Most businesses might find this odd since you obviously have to pay for these services; however, if you look at the big picture, there are big savings to be had. Having additional in-house employees to perform payment processing can be costly, including salaries, health insurance, retirement, and other costs. 

By outsourcing your payment processing needs, you’ll receive top-notch service from trained professionals without the added costs of a full-time employee. Outsourcing your payment processing needs will also free up time and resources for your current employees, which means that they can focus on other tasks and projects. 

As previously mentioned, an outsourced payment processing firm can also reduce your risk of check fraud. These firms are staffed with trained professionals using the most advanced payment processing tools and technologies. Since payment processing is all they do, they can maximize their focus on your needs and ensure your finances are secure. 

Outsourcing your payment processing is also ideal in terms of scaling your company. Whether your business is growing or cutting down to become more efficient, outsourced payment processing can change and adapt to meet your specific needs. Essentially, you’ll only be paying for the services you actually need. 

CONCLUSION – HOW TO PREVENT CHECK FRAUD

Simply mailing a check shouldn’t put you at financial risk. While debit cards and credit cards have dramatically cut down on the need to use personal checks, many individuals and businesses still rely on checks for their financial needs. In fact, according to the Federal Reserve Bank of Atlanta, there were over 14.5 billion check payments made in the United States in 2018. While the number of check payments has continually dropped, over 14 billion checks is still a pretty significant figure. 

If you process or write checks for your business or individual needs, you should take steps toward preventing check fraud. By keeping your financial information secure, using direct deposit, reporting lost checks immediately, and never leaving blank spaces, you can keep your finances and personal information secure. Check fraud can throw anyone’s life or business into turmoil. Be smart with your check issuing and processing to give yourself peace of mind.

READ:  3 Cybercriminal Tactics and How MSSP Can Help You

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