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What are the risks of check fraud, and what can I do about them?

Check fraud has been on the rise locally. Criminals gain access to mailbox drop-offs, steal checks, then wash and alter the checks to steal funds from businesses. By law, businesses only have 24 hours from the time a check clears their account to report it as fraudulent. After that there is no guarantee that the funds can be recovered.

Banks offer services such as Positive Pay to help reduce the risk of fraud. With Positive Pay, a business will send their bank a list of their checks, and any check not on the list will be flagged. The business can then review the check and decide if it’s ok to pay or not. There are similar services that can be used to protect against ACH fraud as well. Ask your banker for information on fraud protection products. If you already have them in place, it is still a good time to revisit the conversation with your banker to see if there are any new enhancements to fraud services that you could utilize.

In addition to fraud prevention services from your bank, there are a few other best practices you can implement to further protect your business. Avoid using outdoor public mailboxes to mail checks, switch to paying by ACH when available, and be sure your staff is properly trained on how to spot check fraud when reviewing check images, online banking transactions, and bank statements.

Originally published in the Small Business Monthly's Ask The Banker Column in August of 2023 by Pete Zeiser, President - Chesterfield Commercial at Midwest BankCentre.