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Protecting Your Business Against Check Fraud

August 2023

Urgent Advisory: Protecting Your Business Against Check Fraud

Kelley Schwartz
Senior Vice President
Treasury Management

Check fraud, specifically washed payees, has tracked upwards in 2023 posing significant risks to businesses. Criminals are employing sophisticated techniques, such as chemically washing stolen checks to alter the payee information, leading to the unauthorized redirection of funds and potential financial losses for companies.
We feel compelled to underscore the grave repercussions of not catching check fraud within a 24-hour timeframe. In such unfortunate cases, the Bank of First Deposit is typically held liable (although not always because of specific circumstances), leading to significant financial ramifications.
The recovery process can be challenging and protracted. The Bank of First Deposit may take several months to respond to fraud affidavits and check recovery requests. Presently, there is no banking regulation mandating a specific deadline for response, leaving businesses vulnerable to potential delays, and extended financial exposure.

To mitigate the risks associated with check fraud, we strongly advise businesses to take the following preventive measures:
    1. Enroll in Positive Pay: Clients can take advantage of Parkside’s Positive Pay service, which helps match issued checks against presented checks to identify discrepancies and prevent fraudulent items from being processed. We validate the information in a check’s MICR line – Issue Date, Amount and Serial Number. In addition, we can add Payee Name Verification, which we highly recommend.
    2. Avoid Mailing Checks: Do not put checks in mailboxes, but rather bring them into the post office. Check theft issues have prompted the USPS to advise that Americans avoid depositing mail in blue collection boxes or leaving it in their own mailboxes for a carrier to pick up. Instead, the agency is now recommending that patrons enter their local post office to send mail securely.
    3. Monitor Account Activity Regularly: Daily reconciliation is key to being able to recover fraudulent checks rapidly. If a fraudulent check is caught within 24 hours of clearing your account, it can be returned to the Bank of First Deposit through normal banking processes.
    4. Pay with ACH: ACH payments are an efficient, cost-effective, and secure way to send money. ACH transfers are more secure than paper checks because they are electronic and do not require physical transportation or handling. Additionally, secure networks encrypt and process ACH transfers. Parkside’s online banking offers ACH Origination.
If you suspect any fraudulent activity or encounter a suspicious check, please notify your bank immediately.
Our Treasury Management Department continuously improves its security measures to safeguard our clients’ accounts and transactions. If you have any questions or require additional information, please do not hesitate to contact our Treasury Management team at treasurymanagement@pfbt.com.
Kelley Schwartz
Senior Vice President
Treasury Management
A dedicated treasury management partner, Kelley proactively helps our clients address challenges to their payment processes, streamline receivables and payables, strengthen controls, and enhance security. She provides valuable education on current treasury management tools and fraud protection. Kelley develops a thorough understanding of each client’s specific issues, and is truly vested in helping them succeed.