Check fraud is incredibly widespread. In fact, because there are so many different types of check fraud, no one has the exact numbers on how many people are affected or how much money is lost each year.
However, a 2016 global fraud study indicates that the typical organization loses 5% of its revenue every year due to fraud. The biggest culprit in these losses is asset misappropriation, and in that category, check tampering and billing schemes accounted for the biggest threats. Banks and other financial institutions face a heightened risk of these losses, and you need tools in place to protect yourself.
Check fraud refers to any efforts to obtain money illegally using paper or digital checks. This can include someone writing a bad check on their own account, forging a check in someone else’s name, or drafting a completely fake check. But it can also include countless other types of fraud using checks.
Check fraud may be committed by your customers, or it may be perpetrated on your customers by thieves or scammers. Here are examples of some of the most common types of fraud:
This is just the beginning. Thieves are always working on new ways to use checks in fraudulent ways.
To avoid check fraud, you need to educate your customers about the risks. Let them know that they need to be as careful with their digital information as they are with their paper information. For instance, they should always shred old checks before throwing them away, but they should also avoid doing electronic banking on public Wi-Fi and should change their passwords regularly.
Your business clients often face a larger risk of check fraud than your individual clients. In addition to taking the above steps, they should also use automatic bank reconciliation tools so they can spot anomalies right away, and they should know how to avoid phishing scams.
Perhaps, more importantly, your financial institution also needs tools in place to help you spot fraudulent checks. Ideally, you need software that can automatically inspect on-us checks and look for aberrations that suggest forgeries. Then, if the signature doesn’t match, the font is off, the number out of order, or the information suspicious in any other way, the software flags the check for manual review. At that point, your staff can step in and verify whether or not the check is real.
You may also want to integrate tools such as SENTRY: Seal. This essentially puts a seal or a unique barcode on every check. That code holds all the check’s vital information, and if anything doesn’t match, your system immediately finds the error.
Running a financial institution can be a cutthroat endeavor. You have to compete with businesses that are vastly larger than you, and at the same time, you have to safeguard your institution and your clients from the constant onslaught of theft and fraud. Let SQN Banking Solutions help. To learn more, contact us at 1-609-261-5500.