How to help protect your business from check fraud

Can you remember the last time you wrote a check to pay for groceries or new clothes? Most retailers have stopped accepting checks in stores. Yet business and consumer checks in the U.S. account for billions of dollars’ worth of payments each year, leaving these transactions particularly vulnerable to fraud.

Checks are instruments of fraud for a few reasons. First, paper doesn't have the same protections, like biometrics or two-step verification, that digital financial services do. And advanced printer technology has made it easier than ever to create realistic-looking checks at home.

Then there's the issue of how long it takes for a check to process. The time span between when a check is written and when it's cashed and cleared creates opportunities for fraud to go unnoticed until it's too late.

Fear not. As common as fraud is, there are ways to help prevent it. Once you’re aware of the dangers, you can take simple steps to help protect yourself and your business.

What to look for

Check fraud can occur whether you're issuing checks or receiving them. As you read through the common types of fraud, consider whether your business habits make you more vulnerable in either instance.

1. Check washing

One of the most common scams is check washing. On a small scale, check washing refers to people stealing checks from individual mailboxes, erasing the ink and writing in a higher value to a different recipient. On a larger scale, washed checks can be duplicated and illicitly sold.

How to help prevent:

• Take outgoing mail directly to the post office for secure delivery.
• Don't let delivered mail sit in your mailbox.
• Write checks using permanent ink.

2. Cash-back scams

There's an adage that if something sounds too good to be true, it probably is. A common scam involves customers paying more than the amount due for goods or services with a bad check and then requesting a refund for the surplus amount. When the check bounces, you’ve lost your inventory and the money you refunded.

How to help prevent:

• Reconsider accepting overpayments for goods and services.
• Ensure that a check has cleared before issuing a refund.
• Work with vendors you trust.

3. First-party fraud

Another common scam occurs when suppliers or vendors misrepresent themselves as part of a legitimate business, accept your payment and then never deliver the product or service. Often associated with social media deals and tech support services, first-party fraud can apply to any type of payment, though check transactions are particularly susceptible.

How to help prevent:

• Verify the person's identity before issuing payment. Try their call-back number or look up the business if you're unsure.
• Slow down the transaction. Scammers try to make situations appear urgent. If someone rushes you to send money, it may not be legitimate.

4. Stolen checkbook

Experiencing fraud with a single check is bad enough, but a stolen checkbook gives scammers as many opportunities for fraud as there are checks. Scammers can easily write checks for any amount and forge your signature. While most checks clear within one to two days, there are exceptions that can delay the process to up to seven days — if you don’t realize it, serious damage can occur during this time.

How to help prevent:

• Safeguard your checkbook.
• Order only as many checks as necessary to fulfill short-term needs.
• Monitor your accounts to catch fraud early.

5. Duplicate loss

Duplicate loss occurs when someone cashes the same check twice. For example, a person could cash the same check through mobile deposit and also at an ATM or a bank. If the check clears each time, you could be out double the amount you intended to pay.

How to help prevent:

• Write checks to people you trust, such as vendors or employees with whom you have an established relationship.
• Use services like Check Monitoring or Reverse Positive Payfraud-protection-services to ensure that the checks you issue match the amounts being deposited.

Follow best practices

In addition to the tips listed above, the following actions can help you prevent fraud:

• Order checks directly from your bank. Checks with better security features, such as watermarks, are harder to duplicate.
• Fill out checks fully and completely. Write out the numerical value in addition to the full name of the recipient, the date and a note. To prevent someone from writing an extra zero or adding themselves as a recipient, draw a line to the end of every space.
• Deposit checks promptly. Cash business checks as soon as they arrive. Use tools like Chase QuickDeposit℠quickdeposit to conveniently deposit them from your phone. 
• Properly dispose of checks. Once your business checks are deposited, either shred them to obscure personal information or void and store them in a safe place.
• Keep a close eye on your finances. Mobile banking solutions like the Chase Mobile^® app help you monitor account activity in real time.chase-mobile-app
• Enroll in Check Monitoring. A type of Reverse Positive Pay, this service lets you review the business checks that you issued before they're deposited. If the check you review doesn't match the one you issued, you can alert your bank not to cash it.
• Consider Check Protection Services. It links with your QuickBooks account to automatically flag discrepancies between issued and presented checks.check-protection-services

Consider other ways to pay

An easy way to avoid check fraud is to avoid paying with or accepting checks. Chase offers other payment options that don’t include the risks of check fraud.

For example, Online Bill Payonline-bill-payment-bb000006 allows you to set up recurring payments and transfer money electronically. Automatic Clearing House (ACH) lets you send money to vendors and employees through Direct Deposit, and Wireswire-transfers are a convenient way to transfer money internationally and domestically.

For more tips and information about preventing check fraud, visit Chase's Fraud and Security Services page.