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Don’t fall victim to payments fraud

There’s good news and bad news about payments fraud. First, the good news: The incidence of payments fraud has slowed and the percentage of companies that experienced payments fraud in 2012 reached its lowest level since 2004.*

The bad news: The level of fraudulent activity remains high and the threats continue to challenge treasury staffs. Sixty-one percent of organizations that responded to the annual AFP payments fraud survey experienced actual or attempted payments fraud in 2012.

As in the past, checks remain the primary target of criminals committing payments fraud (see chart). Counterfeit checks with the organization’s MICR line data were the most frequently attempted form of check fraud, followed by payee name alteration on checks issued, counterfeit checks with the organization’s name drawn on fake or another company’s account information and dollar amount alteration on checks issued.*


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Take steps to prevent payments fraud
Thanks to effective fraud detection and controls, nearly three-quarters of organizations that were victims of actual and/or attempted payments fraud in 2012 experienced no financial loss from the fraud. Among the other quarter, the typical loss was $20,300. Checks were the payment method that accounted for the greatest financial loss as a result of fraud.

A variety of tools, policies and procedures can help you protect your organization from the financial consequences of being a target of payments fraud.

Use positive pay, which reconciles checks presented for payment against a file of checks issued by your organization. You have the ability to make pay or return decisions on checks flagged as exceptions — checks presented that do not match your issued check file. This is your best defense against counterfeit checks.

Conduct daily account reconciliation. Early detection of unauthorized activity is critical. Use convenient tools like online banking and telephone banking to monitor account activity daily. Notify the bank immediately of any unauthorized activity.

Implement internal controls. Following specific policies and procedures within your organization can provide significant roadblocks to fraud:
  • Convert as many payments as possible to electronic delivery, which is more secure and cost-effective than issuing checks.
  • Implement dual controls over initiation and approval of payments, as well as account reconciliation or statement review.
  • Maintain separate accounts for different purposes. For instance, you may want to segregate disbursements from collections, payroll from accounts payable, or have separate accounts for checks, wire transfers, ACH debit payments and card payments.
  • Use high-quality check stock with built-in security features, and purchase it from reputable vendors or through your bank.
  • Develop policies on how check stock is ordered and delivered.
  • Store check stock securely to prevent theft of checks or account information.
  • Use secure financial document destruction processes.


Keep your guard up

You may not be able to prevent your organization from being targeted by criminals, but by thoughtfully employing fraud detection and control systems, you may be able to prevent or limit financial losses from fraud. 


American River Bank can help you stay up-to-date on new threats and new solutions. Contact us today for more information