As we approach the Halloween season, we thought it would be appropriate to share some horror stories of business fraud that we have witnessed through the years. Check fraud is one of the most common scams out there, so here are some “tales from the dark side,” as well as ideas that your company can use to prevent fraud!

The Case of the Vanishing Money

One customer was the unfortunate victim of check fraud. This company wrote a check to a lockbox address for a supplier payment. The payment of nearly $50K was intercepted along the way to the P.O. Box. The payee name was removed and rewritten through check washing to be made payable to an individual and not the supplier. The check cleared for this scammer with the correct amount. The company never reviewed the payee until the vendor called and told them they did not receive payment. Because businesses have 24 hours to report the fraud, it was too late for the bank to return the item and recover the funds. So nearly $50K gone, no recourse! 

While check fraud is a very common type of fraud, there are several ways that businesses can help prevent this. One way is to consider using a secure source to send payments online. Payments can be sent electronically using Automated Clearing House (ACH) or wire transactions. If paper checks are used, you can add fraud prevention services that verify the information on the check, including the payee. Check your mail often and avoid leaving mail anywhere overnight. Finally, use online banking daily to verify information and transactions that could potentially be fraudulent.

A Spooky Shopping Scheme

This organization was writing checks as an agent to individuals for monthly spending money. One of the payees used the account number from the check to purchase items online. The organization was reconciling and realized that that an individual they served had perpetrated fraud on the account.  

To help prevent a scenario like this, make sure to check your bank account daily via online banking to verify that the transactions are accurate. Call your bank immediately if anything seems odd or suspicious, or if there are payments that you do not recognize. Be sure to contact your banker to discuss using fraud prevention services that will detect checks and electronic transactions that may be attempted fraud.

The Referral Racket

A service business was writing checks to individuals that used their service when the person refers another consumer to the business. This company did not know these individuals outside of the fact that they referred and sold another service package. The referral check was for $100. There were multiple occasions that the checks were deposited at different banks via mobile and then finally in-person at another financial institution; many for up to $400 per check. There was no daily reconciliation of the checks until the beginning of the next business cycle. The funds that were deposited were withdrawn as quickly as the day they were collected. Because of this mishap, this company lost thousands of dollars.

Avoid the Horrors of Business Fraud!

There are several steps that businesses can take to help protect themselves again fraudsters and hackers and reduce the threat. These include:

  • Have bank statements mailed to a P.O. Box and check them right away
  • Use internal audits
  • Train employees on how fraud can occur
  • Use your financial professional team – Banker, Accountant, Attorney and others to implement processes to reduce the chance of being a victim
  • Use Positive Pay to manage your checks and payment
  • Use blocks and filters to keep your technology safe from hackers
  • Add business insurance to cover the losses due to fraud 

Also, remember to provide your employees with fraud prevention training and make sure computer systems are equipped with appropriate fraud detection, updates and firewalls. When it comes to banking, customers should understand and familiarize themselves with the security that their bank uses to access online information.  

Most importantly, customers should call and ask their banker for a risk assessment. This will help ensure that the proper security measures are in place, and that the company is protected should any problems arise. For more information, contact treasury management at ICB at 1.888.686.9998.

Written by Anne Denissen

Anne Denissen is Vice President - Treasury Management at Investors Community Bank. She holds a Bachelor of Arts degree in computer science from Lakeland College and has more than 20 years of banking experience. She helps guide each business to solutions that fit their needs, and coordinates the implementation of treasury management services.

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