By: Wilmington Trust

Check fraud is a growing problem for many businesses. Business owners are expected to take reasonable measures to safeguard their checks from both a physical security and procedural security perspective. To help reduce the risk of loss to your business, consider the following suggestions that can help you prevent check fraud.

• Inventory your check supply at least once a month. Checks are rarely stolen from the front of the check supply; instead, they are typically taken from the middle or back. Therefore, a complete inventory is essential. If your business is burglarized, even if nothing appears to be taken, don't overlook inventorying your check supply.
• Consider investing in a small safe to hold your supply of checks. Several reputable safe companies offer small wall safes in a reasonable price range. When used in conjunction with an on-premise alarm system, a considerable level of protection can be afforded.
• Keep only a small working supply of checks available during the day and keep the bulk supply under lock and key at all times. Check the working supply against your check register at the end of each day and report any missing checks immediately.
• Know who has access to your office, such as cleaning and maintenance personnel.
• Promptly reconcile your account when your statement is received. Have the reconcilement done by someone not involved with issuing the checks. Notify the bank of any problems immediately. Businesses are expected to have reasonable internal controls in place to discourage fraud by employees. The separation of duties outlined above, along with prompt account reconcilement, is one of the most important internal controls that a business can have in place to protect itself.
• Use checks that, at a very minimum, have at least two security features, such as a check with microprinting and a watermark. On most checks, you can locate a summary of the security features next to a small padlock icon on the front or back of the check. Most of these features are designed to discourage counterfeiting -- a problem that continues to proliferate as computer, scanning, and copying technologies become more affordable.
• Consider using available check fraud training resources for the employees of your business. In Delaware, the Delaware Division of State Police offers a free, semi-annual Merchant Training Academy available to any business located in the state. The Academy covers a wide variety of concerns to businesses, including check and credit card fraud, burglary, robbery, etc. Many other states offer similar programs.
• Participate in a cooperative venture between businesses and law enforcement. Many businesses have begun to take a proactive approach to combat fraud. Nationwide, cooperative associations have been formed to expedite the exchange of fraud information that, in turn, helps businesses to protect themselves against losses. Your local law enforcement agency can direct you to such ventures in your community. If none exist, consider asking law enforcement officials for assistance in starting one in your community.
• Employ Positive Pay. This is a check payment system that documents important information about each check, such as the amount, check number, bank information, and date. The system then transmits this information to the bank for verification. Each check must be validated before it can be cashed and paid.
• Use the Automated Clearing House (ACH) network to convert paper transactions to electronic ones. Although electronic transactions are typically more secure, you might also consider employing a filter to protect your business from fraudulent ACH debit transactions against your accounts.

It is an unfortunate fact that money obtained from financial crime, including check and credit card fraud, is used to fund and perpetrate street crime. Both businesses and law enforcement agencies have recognized this and are taking steps to prevent financial crime from occurring, to their mutual benefit.

Updated: January 1, 2013

This article is for informational purposes only and is not intended as an offer or solicitation for the sale of any financial product or service or as a determination that any investment strategy is suitable for a specific investor. Investors should seek financial advice regarding the suitability of any investment strategy based on their objectives, financial situations, and particular needs. This article is not designed or intended to provide financial, tax, legal, accounting, or other professional advice since such advice always requires consideration of individual circumstances. If professional advice is needed, the services of a professional advisor should be sought.
© 2013 Wilmington Trust Corporation.