Matt Blogs!

Positive Pay (2)

The most common reasons legitimate checks are not included in the issued file are emergencies that occur after the regular check run or as disbursements from branch locations. In those situations, the data from those checks should be entered into the next daily positive pay file transmission. Should that not occur, a “mismatch” will result. The other cause of a mismatch is an attempted fraud, such as when a legitimate check is altered for a larger sum or when a completely counterfeit check is created using invalid check numbers and dollar amounts.

When the company receives notification of any mismatches, it should research each item to determine whether the cause was innocent or an attempt at fraud. This requires determining who authorized the check, what the purpose of the payment was, and whether a crime may be occurring. The bank will need a decision before the Fed deadlines so that it can return any rejected checks through the banking system. To protect itself, the bank will require a default decision of “pay” or “don’t pay” at the time that the service is established.

In the Real World: Positive Pay Is Not Perfect

Positive pay may not be able to prevent a fraudulent check from being cashed at a bank teller line since only a few banks currently have teller online access to the issue file. The best interim protection is to work with the banks to develop a program that assures positive identification for check cashing, such as a company-issued photo identification and two other proofs of identity. Furthermore, positive pay cannot catch a counterfeit endorsement or prevent encashment of a fraudulent item in good faith by a check cashing exchange.

Taken From : Essentials of Managing Corporate Cash

Posted in General
You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.