Check Fraud Prevention (2)
December 28, 2008 – 7:26 amPolicies and procedures:
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Work with local banks to prevent check fraud. Insist that checks presented for payment are supported by multiple identifications, including a driver’s license, a credit card, and, if the check is for payroll, an employee photo ID.
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Limit authorized signers to a few senior corporate officers. A company with numerous branch locations can have hundreds of authorized check signers. Although banks do not verify signatures except when checks are deposited through a teller, controls on approved signers can improve the possibility of preventing or proving a fraud.
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Separate the function of maintaining the approved vendor file from other activities, and do not allow vendors to be added by purchasing clerks.
Electronic Check Presentment
Certain banking institutions use electronic check presentment (ECP) to reduce the risk of fraud. The depository bank captures the MICR-line from the check and transmits it electronically to the drawee bank. The drawee bank can then review the checks-issued file and determine if any item is a mismatch one or two days before the paper check clears. (The actual check clearing process is based on the paper check, not the ECP). Checks transmitted through ECP constitute less than 5 percent of all check volume, with the Fed handling about three-quarters of all ECP volume. (The governing organization is the Electronic Check Clearing House Organization (ECCHO), whose Web site is located at www.eccho.com.)
A related program is check truncation, where the paper item is not returned to the issuing company and all funding and reconciliation is from the MICR-line data. Typically, a copy of the check is captured through imaging, which is then provided through a CD-ROM, paper, or an Internet download.
Taken From : Essentials of Managing Corporate Cash
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