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Check Fraud Prevention

While positive pay has significantly reduced the incidence of check fraud, disbursement systems have numerous other potential areas for criminal attack. Other actions to reduce fraud include the following (in sequence order):

Prior to issuance:

1. Secure check stock and signature plates, and allow only authorized staff to have access to the treasury locations where they are stored. Maintain logs of use, including check number runs.

2. Verify vendors used in the purchasing-accounts payable cycle. Fraud may occur in purchasing through the use of fictitious vendors. Vendors should be reviewed for legitimacy by the following actions:

   • Require a federal tax identification number

   • Conduct a credit check on the vendor using a credit agency

   • Obtain an audited financial statement

   • Visit the vendor’s premises

   • Request references from other customers

Issuance:

1. Print checks on blank safety paper using laser check-printing equipment. Rather than signing checks by signature plate, print the signature or a substitute at the time the check is printed. Substitutes for signatures include unique characters, Greek letters, or other typographical marks.

2. Consolidate check issuance and close local accounts opened for the convenience of branch expenses. All checks should be issued from a central site under the supervision of designated employees.

Post-issuance:

1. Keep all checks in a secure area within treasury. Do not allow company employees to pick up checks for individual transmittal, and do not allow vendors to stop by for hand delivery of payments.

2. Review all positive pay mismatches to ascertain that approved items are legitimate payments and not attempts at fraud.

Taken From : Essentials of Managing Corporate Cash

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