B2BMonday, October 1, 2007 9:28 PM CDT

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BANKING: Protecting your business’ checking

By Larry Maschhoff

Each year, businesses and banks lose millions of dollars to bad checks, frauds, scams and other white-collar crimes.

And, while you may think, “it won’t happen to me,” the truth is it probably will and it probably already has – unless you are taking appropriate measures to safeguard your business’ financial accounts, especially your checking account(s). Following are some of the common ways fraud can occur and methods you can take to help prevent against falling victim to these crimes.

The professionals

A form of business identity theft, phony check creation happens by professional criminals who have the technology, know-how and skill to duplicate and/or recreate other business’ checks. These fraudulent checks look very real and are near impossible to recognize. And, by the time it is recognized as a fraudulent check, the criminal is long gone with cash in hand. So, how do they get away with it?

All checks share similar properties, including a routing number, an account number, the business’ postal information, and the financial institution’s information. Criminals change certain elements of these checks in order to pass them off as real forms of payment. They may use one bank’s name with another’s address or transpose routing numbers. These small changes are unnoticeable to the untrained eye, and because of the time it takes for a check to be processed (2-10 days), the fraudulent activity is not caught until the bank that is supposedly responsible to pay the check receives it and identifies it as not one of their own.

It would be hard for any business to prevent their checks from being duplicated – that is the risk we take in writing checks in today’s world. If it is your business whose checks have been duplicated or recreated, most banks and financial institutions protect their customers’ accounts and checks should theft occur. So, while you are at risk, there are protections in place. However, if you are an establishment that chooses to cash a bad check, you do lose out on the transaction unless your Bank can trace and recover your money. Places such as grocery and convenience stores, even restaurants or some retail shops, provide this service as an added convenience to customers – but with it comes great risk. If you are a business that does choose to cash checks for customers (i.e., a payroll check), follow some of these safeguards:

Know your customers.

Don’t get in the habit of cashing a check for just anyone.

Always take ID.

Never cash a check without matching the name on the check to a name on an ID to the person’s face.

Set a limit.

Only cash checks up to a certain dollar amount.

Watch for changes in habit in regular customers.

If a longtime customer of yours begins to changes his/her habits, you may be more careful of cashing their check – their change may be due to a job loss, layoff, gambling problem, creditor problem, etc.

The employees

In addition to professional criminals, company employees are responsible for a high percentage of fraudulent cases. While you may believe your employees are trustworthy and responsible – and we really hope they are – all business owners and managers need to be very aware that employee problems can occur in the most unlikely places or with the most unlikely people.

Some common ways employees can fraudulently use accounts include stealing company checks and writing them out for cash, paying fake bills or bills in excess of the amount truly owed, and/or hiding bills or the monthly checking statement. In order to safeguard against activities such as these, there are some simple methods you can employ in order to reduce your risk of fraud or theft occurring.

Employee criminal background checks. No matter if your employees will be handling money, paying bills, or have access to your finances, perform a criminal background check on every new employee (and existing employees if you have never done one before). While it is not a fail-proof method, it may help you from hiring someone who has a past history of stealing.

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