What SMEs Need to Know About Cheque Fraud

Tue, Jun 27, 2017

Featured Post, Financial Advice

In the digital age, online businesses, customers and gamers are more protected than ever.

From enhanced encryption and price comparison sites to matched bets educational resources, there are a number of contemporary tools that enable citizens to save, secure and ultimately optimise their financial resources online.

The same cannot be said for offline financial transactions such as cheque payments, however, which have become almost unfashionable in the modern age.

Although cheque use has declined, this medium still accounts for 45 percent of all money lost to payment fraud in the modern age, meaning that your business remains vulnerable to it in 2017.

Sometimes the crime is unintentional; it’s easy to make a mistake and write a bad cheque if you’re not tracking your cheque book balance carefully. But fraud also includes everything from a desperate customer floating a cheque and hoping to deposit the funds before it clears to serious crimes like identity theft, counterfeiting, and forgery.

Regardless of the intent of the customer, cheque fraud costs businesses money, even in an age where contactless and electronic payments are commonplace. Here are some ways to protect yourself:

 

  • Spot Fake Cheques

Counterfeit cheques aren’t always easy to spot, but experts advise training your staff to watch for a few key indicators, including the following:

  • Cheques without perforations
  • Low cheque numbers (below 400 on personal accounts or 1500 on business checks)
  • The account holder’s name is printed in a different font than the address
  • Stains or discolorations that could be caused by erasing or altering the cheque
  • Missing info (customer or bank address, cheque number)
  • MICR numbers along bottom of cheque are shiny (they should be dull)
  • Final digits of MICR encoding and cheque number don’t match
  • Signature is missing or cheque isn’t dated properly

 

  • Make Sure Funds Are Available

Sometimes the cheque is real, but there’s no money in the account. How can you protect yourself from this type of fraud? If your business receives a lot of cheque payments, consider adding a merchant cheque reader to your payment processing options. These devices scan the MICR data at the bottom of the cheque. A cheque reader can warn you if there’s a problem with the payment, and some of them will convert it into an electronic transaction and process the payment instantly as if the cheque were a debit card.

 

  • Watch Your Own Cheques

Customer payments aren’t the only source of cheque fraud risk for businesses. A criminal could duplicate, forge, or alter your cheques and wreak havoc on your account. Protect yourself with secure voucher cheques that offer advanced security features┬álike security holograms, which make the cheques impossible to duplicate.

You could also apply a tamper-resistant security coating, which makes any changes to the payee or amount instantly obvious.

 

  • Be Alert for Scams

One of the most common scams to target small businesses is the cheque overpayment scam. A con artist will contact you offering you a huge and highly profitable sale. The scam begins when you are sent a payment by cashier’s cheque that is way more than you’re owed. You’ll then receive a very apologetic message saying that you were given money urgently owed to a different vendor, and can you please deposit that payment immediately and wire some of the funds to someone else. With a giant cheque in your hand, it’s hard to say no, but later you’ll discover that while the cashier’s cheque was a fake, your wire was real and your account is now hopelessly overdrawn.

Cheques offer a convenient way to pay bills and transact business, but that convenience comes with a high risk of fraud. The best prevention is awareness and education for yourself and your staff.

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