Proactive Fraud Prevention is Key

Proactive Fraud Prevention is Key

Fraud is an ongoing concern for businesses, public funds and non-profits of all sizes.  Reputations can be destroyed from a single incident and financial loss can occur, which could affect your organization’s ability to expand.  Banks offer fraud prevention services to help prevent and detect both check and ACH (Automated Clearing House) related fraud.  Fraud prevention services are made up of Check Positive Pay and ACH Debit Positive Pay, which go together like “peanut butter and jelly” to form what is known as fraud prevention services. 

While check use declines, checks remain the payment method most impacted by fraud and costs billions of dollars in losses each year.  Checks also represent the primary source of banking information used in ACH debit fraud.  Actions you can take to prevent fraud include the use of Check Positive Pay and ACH Debit Positive Pay.                                                                                                    

Check Positive Pay
An automated check matching service, known as Check Positive Pay, is the most effective check fraud prevention tool to catch counterfeit, duplicate or altered checks.  It saves time, money and stress involved in dealing with fraud.

• Check Issuance:
  • Either manually input or upload a check file into the bank’s online Positive Pay system
  • Check issue files can typically be submitted in a variety of formats, which may vary by bank

• Check Negotiation:
  • Only the checks you authorized will be paid
  • Checks presented that do not match your authorized criteria will be flagged and sent to you as an “Exception Item”
    • Opportunity to review the front and back image of the check
    • Notify bank of your decision to either “Pay” or “Return” the item by the bank’s designated deadline
    • Check Positive Pay service compares the account number, check number, dollar amount and sometimes payee name
    • Issuance information can be submitted online 24/7
    • Integration abilities with account reconciliation programs depending on your bank’s system

• “Void” status:
  • Equivalent to a stop payment
  • No cost
  • Valid for the life of the account and is effective for as long as the service is in place on the account on an uninterrupted basis

• Dual Control:
  • Internal controls:
    • Organization can have “User A” input or upload the check file information and have “User B” review the data and release the information to the bank once approved
    • Having two employees partake in the transaction is an effective way to keep employees honest and prevent internal theft
    • Dual Signatures:
      • Most banks do not review checks for dual signatures, as only a single signature is typically required for negotiation
      • Feature can satisfy an organization’s dual signature requirement

ACH Debit Positive Pay
Electronic transactions, known as ACH (Automated Clearing House), are more readily available to everyone, including fraudsters, due to technology advancements.  The only two pieces of information a fraudster needs to commit electronic debit fraud is a checking account number and ABA/routing number, which makes this an attractive option.

• ACH Debit Originator:
  • Each has a unique identifying number, otherwise known as an Originator ID
  • Create a list of authorized Originator IDs so the service can filter which debit transactions you want to have paid against your account
  • Limits per Originator ID can be established depending on your bank’s system.

• ACH Debit Negotiation:
  • Only the ACH Debits you authorized will be paid
  • Compares Originator ID submitted verse what you have designated as authorized
  • ACH Debits presented that do not match your authorized criteria will be flagged and sent to you as an “Exception Item”
  • Notify bank of your decision to either “Pay on a one time basis”, “Pay and add to your list of authorized Originators” or “Return” by the bank’s designated deadline

The 2024 AFP® “Payments Fraud and Control Survey Report”:
• 80% of organizations were victims of payments fraud attacks/attempts in 2023, which is 15% increase over the previous year
• Checks continue to be the payment method most vulnerable to fraud, with 65% of respondents reporting their organizations faced fraud attacks of this type
• 30% were unsuccessful in recovering funds lost
• 41% of organizations were successful in recovering at least 75% of funds lost

The headaches of dealing with unexpected fraud can be time consuming, tedious, expensive and often results in monetary losses.  Additional actions must be taken on your part as the account holder, which may include filing a police report, closing your account, opening a new account, ordering new account supplies and redirecting all funds to the new account quickly.

The bottom line is no organization is immune from fraud.  I strongly encourage you to contact your banker and learn about their fraud prevention service so that together, with your bank, you can protect your bank accounts.  When it comes to protecting your organization against fraud, proactive prevention is key.  Fraud Prevention services are available for commercial account types only and not available for personal account types.

Natalie Saikowski Goertz
President and CEO
Business and Banking Concierge, LLC
www.BusinessAndBankingConcierge.com