Checks are still the most convenient form of payment between businesses—and that makes them an enticing target for criminals, who are devising new ways to steal, duplicate, alter and cash checks illegally.
Even with paper check usage declining and fraud prevention and detection technologies improving, check fraud continues to be the most common type of payment fraud, impacting nearly 70 percent of organizations, according to a 2019 J.P. Morgan Payments Fraud Survey.
Check fraud has surged in the last decade, accounting for 35 percent of fraud losses, according to a 2017 Deposit Account Fraud Survey Report from the American Bankers Association. Criminals are increasingly turning their attention to checks and automated payments like ACH transfers now that implementation of chip-card technology is deterring debit and credit card fraud, banking experts say. Instances often involve counterfeit and bad checks, and many scams occur at larger banks.
Safe Haven, which provides shelters and housing programs for homeless families in Nashville and relies on donations and community grants to operate, wants no part of these statistics.
“As a nonprofit, we feel a particular responsibility to be good stewards of our funds, so we decided this year to proactively increase internal controls,” COO Collen Mayer says. “After talking with our bankers, we realized a key vulnerability for our organization was around writing checks.”
For the majority of payments, Safe Haven uses XMI’s automated accounts payable workflow, which requires online approval by one or two officers, depending on the amount. But the organization does keep some paper checks at the shelter for emergency client-related expenses, such as security deposits. That’s why they recently implemented Positive Pay, a virtual cash-management service that protects businesses from altered, forged or counterfeit checks and has helped address the risk of keeping check stock on site.
How Positive It Works
Positive Pay helps banks verify the checks companies issue against those presented for payment so they can stop phony payouts before they clear. The service gives companies extra security against fraud attempts by matching the check number, dollar amount and account number of each check against a list the company provides. This allows the bank to flag any discrepancies and notify the company before processing questionable checks.
Positive Pay systems can vary depending on the bank, but they generally work like this:
- A company sends the bank an electronic file of all checks issued on a particular day, listing the check numbers, amounts and date.
- The bank compares the checks it receives for payment against that list, rejecting checks that are missing or show a different date or dollar amount.
- The bank notifies the company about any suspect checks, withholding payment until the company can review them and approve or decline payment.
Some Positive Pay services allow businesses to add the names of payees to each check listed to help them catch forgeries. Many banks also offer Reverse Positive Pay, a cheaper service that requires companies to monitor their own checks via a daily list from the bank of items presented for payment and flag possible fakes.
Positive Pay for Peace of Mind
Initially Mayer worried that logging each check would take too much time, but after several months of using Positive Pay, he found it to be simple and easy to use.
“Most importantly, our board and agency leadership feel much more confident that our funds are safe and will be there when we need them to continue advancing our mission of ending family homelessness in Nashville,” he says.