How to Prevent Check Fraud

Checks are commonly used in personal finance and throughout corporate America to transact business, but fraud is an ever-present risk in the financial system. Preventing check fraud requires planning, vigilance and internal controls within organizations. The following steps help prevent fraudsters from leveraging checks for nefarious purposes.

Segregation of Duties

Of critical importance is the segregation of the recordkeeping, custody of assets and authorization of transactions in businesses. This standard internal control framework is especially relevant to checks and check signers. For example, bookkeepers should not store checks and have the ability to authorize check payments, because it presents an opportunity for rogue behavior. Accounting departments, even in small companies, should have ways to protect the authorization of transactions in a manner that keeps everyone honest.

Sequential Checks

Secure storage and tracking of checks is critical for mitigating fraud risk. Only authorized personnel should have access to checks, or the ability to order checks, when current supplies dissipate. Sequential checks are used to aid in the tracking and identification of unusual or suspicious transactions. For instance, if a check is cashed that is a duplicate and is associated with a prior year batch of checks, it becomes easier to spot the anomaly and further investigate the disparity.

Bank Reconciliations

On a personal or corporate level, bank reconciliations provide an effective means to catch disparities between accounting records and bank statements. Fraudulent checks are identified more quickly, when a trained eye is watching the activity in the bank. Too many companies neglect to reconcile accounts effectively, providing fraudsters with the opportunity to cash fraudulent checks or perpetrate unauthorized transactions. Working with a qualified accountant to reconcile bank statements is key for mitigating risks.

Sourcing Quality Checks

Ordering bank quality checks is an effective means to thwart criminals, because it makes it more difficult for checks to be forged, manipulated or duplicated. Materials and printing techniques are critical in deterring thieves from even attempting to cheat the system. Low cost bank quality checks make it easier for organizations to protect themselves, while minimizing the overhead needed to run a business. The loss of money attributable to poor quality checks is too high a risk to tolerate.

Document Retention

Storing accounting records in a secure location protects bank account numbers, canceled checks and other sensitive information. Keeping records such as these away from potential fraudsters is of paramount importance. The fewer tools criminals have at their disposal to commit check fraud, the better for businesses.

ASAP Checks

Check fraud is personally, financially and professionally detrimental, but with careful precaution and sourcing of checks, companies can mitigate risk. Look for bank quality checks without bank prices, to save money and improve banking transactions. To learn more, check out all of our resources on Check Fraud Prevention.