How to Combat Check Fraud in Your Business

Check fraud has become a significant issue for companies that rely on this form of payment to pay employees, vendors, suppliers, and subcontractors.  In 2023, financial institutions reported unprecedented losses due to soaring check fraud in the range of $21 billion. Check fraud has evolved from simple forgery to sophisticated schemes leveraging advanced technology. Check fraud schemes commonly target the U.S. mail to steal checks, alter or wash them to change the payee and dollar amount, and ultimately steal money from business accounts.

It’s important for us to raise awareness among our clients and business community about the threat of check fraud. To help mitigate the risk of check fraud, we have provided information below regarding banking services that can be implemented and steps that can be taken to help prevent check fraud.  

Banking services that can help prevent check fraud

Positive Pay Services

Positive Pay is a fraud prevention service that detects potential unauthorized check presentments. This service works by comparing and verifying checks issued by your company to the checks presented for payment against your account – helping you to stay ahead of check fraud.  With Coastal States Bank’s Positive Pay service, you can receive email alerts on this type of suspicious activity and log in to Business Online Banking to review the check for legitimacy and either approve or return the check payment. An additional layer of protection can be added to your account by using CSB’s Positive Pay Payee Match feature, which matches the payee’s name provided on the check to a list of pre-authorized payees on your account to verify the payment. 

ACH Origination

ACH payments provide an efficient way for companies to generate overnight and future-dated electronic payments from one financial institution to another. These electronic transfers are administered by the Federal Reserve’s Automated Clearing Housing, allowing companies to initiate electronic payments to and from their vendors, suppliers, employees, and subcontractors in a safe and timely manner. Using ACH origination eliminates the threat of check fraud and provides benefits to businesses, including:

• Reducing processing costs associated with check writing, wire transfers, and reconciliation costs.
• Offering a timely method to collect receivables and pay vendors and suppliers electronically to better predict cash inflows and outflows.
• Providing the convenience of not having to write checks and mail payments.
• Eliminating the risk of lost or stolen checks.

Business Debit Cards

Coastal States Bank’s VISA Business Debit Card offers a simple and convenient way to make everyday purchases plus, cardholders can take advantage of all the CSB perks like free worldwide ATM withdrawals with a minimum $50 withdrawal at non-CSB ATMs, online monitoring of your card activity, and debit card rewards.

Business Credit Cards

Business Credit Cards is another alternative form of payment for business expenses. Businesses can cover expenses such as office furniture, supplies, or travel with this secure form of payment. Credit cards are accepted nearly everywhere and may even earn you rewards for expenses your business will cover anyway.

Bill Pay

Bill Pay offers an efficient, easy, secure and fast way to make disbursement payments.  Users can conveniently pay utility bills, vendors and more with one-time or recurring scheduled payments in online and mobile banking.  The Bill Pay dashboard displays the current status of your payments, lists your scheduled bills, and gives you the ability to schedule future payments.  It’s more secure than mailing check payments thereby helping to reduce your risk of check payment fraud.

Business best practices to help prevent check fraud

In addition to implementing convenient and secure banking services for your business bank account, businesses can also implement processes and procedures that will keep their finances safe and protected from fraudsters.

1. Monitor and Balance Checking Account

Review your bank account(s) activity daily to see if anything abnormal is taking place with your account. The sooner the fraud is detected, the quicker future losses can be prevented.

2. Secure Check Stock

Storing your check stock in a secure and locked location will help prevent any unauthorized access to your checks, which can be used to create counterfeit checks on your account.

3. Hand Deliver Outgoing Mail

By hand delivering mail to your local post office or your post officer delivery person, you can prevent unlawful access to your outgoing payments. Don’t place your outgoing mail in your mailbox or freely on a desk that is accessible to the public.

4. Limit Access to Check Stock

Only allow authorized employees to gain access to your check stock that is stored in a secure location.

5. Add Security Features to Check Stock

Several check printing companies provide security features for their checks that can make it difficult for fraudsters to duplicate check stock.

6. Check invoices to make sure they are current

Check incoming invoices to make sure they reflect your last check payment. If information does not match your records, promptly contact the party listed on the invoice to confirm the payment status.

These best practices are essential safeguards for your company to have in place to help prevent check payment fraud. Contact a member of our Treasury Management Team or a CSB Banker for more information on safeguarding check payments, secure alternative payment methods, and fraud prevention services and best practices.