You Could Be Liable If...
You do not protect your negotiable checks by using ordinary care. In the early 1990's the uniform Commercial Codes or UCC had modifications to them that placed the business owner in a position where the bank was no longer the sole responsible party should check fraud occur. If it is determined that the bank did everything they could to prevent fraud loss and the business owner failed to protect themselves, the loss is the responsibility of the business owner. In addition to the financial loss from the check fraud, there is the additional loss of time investigating the crime, damage to your credibility and worry over where you go to gain a higher degree of protection.
A Billion Dollar Problem and Growing
Check fraud is a growing business and is expected to continue to grow in this decade. The dollar loss for businesses is estimated to range from 12 to 14.5 billion dollars a year. Those responsible for these losses range from a small core of professional check fraud criminals to a larger group of gifted amateurs who have harnessed the power of inexpensive computer technology to perpetuate these crimes.
Are You a Target for Check Fraud?
The list of companies that are a target for check fraud is endless, but there are certain types of situations where check fraud artists are looking to separate the unsuspecting from their money:
- Checks that are easy to copy, reproduce or alter (those without document security present).
- Easy access to pre-printed checks that are not locked up or accounted for.
- High volume bank accounts where fraudulent checks can easily slip through your system.
- Check runs that are canceled but the printed checks are dumped in the trash, not shredded.
Is It Possible to Protect My Company?
Yes, you can reduce the chance of someone counterfeiting (copying) or committing an alteration (forgery) of your checks, as well as reducing your liability if a check fraud occurs. There is not a 100% foolproof system that exists to prevent fraud, but you can significantly minimize the risk of check fraud by using a multi-prong approach. The critical requirement is to have set procedures in place for preprocessing and post-processing of your check handling and to use security check stock that is unique and is not easy to alter or reproduce.
- Restrict access to the checks you store in your offices. Ensure only trusted employees have access to any check the company maintains.
- Audit your checks. Know where the checks are, make sure preprinted checks are kept in numerical sequence.
- Use custom designs on your checks or check stock and include multiple layers of document security features now available in the marketplace.
- Advise your bank branch that holds your account of the security features that you have present on your checks or check stock. Keep a copy of the letter you send to the bank. Suggested format letters are available from us - just request them.
- Reconcile your bank statement promptly (don't wait 30 days from the mailing of the statement package from your bank). Report any discrepancies immediately to your bank. Have your bank statement mailed to your home for your review before you bring it into the office for the person who does the reconciliation.
- Insure any checks you put in the mail are in an envelope that has a protective security tint inside, place the mail in the letter drop box or hand it to a U.S. Postal mail carrier. Don't put the checks in a tray that is set beside any drop box on a street, parking area or pedestrian walk area.
The Best Bet for Protection
Don't take any chances. Handle your checks like the cash they are intended to become when you send them out. It is always better to have more security than you need rather than needing security when a check fraud issue arises.
