I updated my School of Entrepreneurship class on Preventing Fraud recently. Fraudsters are always developing new ways to scam businesses. Check fraud is a big deal. There are a few versions of it, but basically, they can steal your mail, inbound or outbound, from your mailbox or the recipients and find a check of yours in an envelope.
Then they dip the check in acetone, and the ink from a pen dissolves right off it. As I have learned, even a check printed out from a computer printer can be washed like this. They can wash just the payee or just the payee and the amount. Now they have a blank check with your signature.
Now they write it out to themselves or open a fake bank account to a fake name, write the check to that name, deposit the check, take the money, and they are gone. Local police can’t go out of their jurisdiction, so you are out of luck. This is a huge problem.
In other cases they can duplicate the check and print more blank checks from a simple printer.
To defend yourself from check fraud, use Positive Pay. This is an extra step your office takes. They make a list of checks they have written out with the check number, payee and the amount. They send the list to the bank. The bank will not process any check that doesn’t match with your list.
I know a company whose bookkeeper didn’t want to take the extra step and signed a paper with the bank to opt out of Positive Pay. Last month, the bad guys got hold of an $11,000 check and changed the payee, and got away with it.
Use Positive Pay. Call your bank.
Great advice! This happened to me. We had a bundle of about 10 checks stolen out of the outgoing mail. They took the 3 biggest checks totaling over $120,000 and got away with it exactly like you said. The problem is we DID have positive pay and my accounting person didn’t pay attention to the fact that the payee had been changed and was only looking at the check #s and amounts. So I would add, make sure you look closely at the details when approving positive pay and use ACH whenever possible.
larry@cellardoors.com
We were hit out of our mailbox. It affected not just us but our clients who had mailed checks as well! A new locked mailbox ,and Positive Pay, have done the trick.
We got hit for a few thousand over several checks. They were payroll checks. The bank had called to verify one of the checks was legitimate. We already knew what was going on. The bank did not cash the check and the perpetrator walked right out of the bank. They were never caught. The bank did reimburse us the funds that were stolen but told us they would not in the future if we didn’t use positive pay.
Hi Larry; EFTs and e-transfers are easier and safer than using a cheque. We switched over to EFT payment as our primary means about three years ago, and haven’t had any fraud issues, or missing cheques to mail problems since. Its been great for us
and thanks for mentioning Positive Pay, never heard of it and i’ll see if ny bank offers it (for the odd time we do send out a cheque)
Thank you very much for this info! We have not had an issue and don’t do Positive Pay but I’m going to check into it. I was curious so just did some research. Apparently checks printed from laser printers are not washable by ordinary methods and so they are more secure. This is what we have been doing so that’s a good thing. Another suggestion is to use gel pens that soak in more and are harder to wash. I wonder about permanent Sharpies? Seems like that would do the trick if handwriting checks. I might have to test that…
Yes, we had several issues in the past and now use positive pay, use it with ACH as well, ACH is even harder to retrieve after the fraud event. Don’t let the bad guys win.
Larry, your article was very timely for us – we recently had the payee name fraudulently changed on a $40,000 check, but our bank’s Positive Pay system caught the error and held the payment. Positive Pay is definitely a must for any business.
We changed banks last year. They told us that this type of fraud is costing the banking industry billions of dollars annually. They are moving away from reimbursing the loss if their customers don’t pay for the Positive Pay service.
Yes,…. had a trusted employee steal checks from the mailbox,… made out to the company,….endorse them with her name,.. and deposit them in her personal account ,…. so many things wrong with that but her bank had no safeguards against. She used the ATM and her phone to make the deposits. Kind of a bad year……
Larry
someone stole a bunch of checks out of my mailbox continually , I was unaware we thought our client just didnt pay us, $15K.. also get mailbox with a lock
We had a check in our outgoing mail that got intercepted. Because our vendor wasn’t paid and we had an open invoice, they reached out to us personally (because it’s not like us to not pay our bills). We ended up finding the payee on the check was changed and cashed. But not only that, the thieves duplicated the check and cashed that one too. So, we were out double the amount ($20,000).
We contacted our bank and we we’re lucky to be reimbursed. But, that was only if we agreed to sign up with Positive Pay. Positive Pay is a MUST to best protect yourself from check fraud. Our bookkeeper and I went through training with our bank on how to properly use it so we are the best protected. I would highly recommend getting Positive Pay to avoid the possibly of losing a significant amount of money!
We’ve had check fraud twice. Once was a “fake check” created somehow, written out to a person and cashed for around 5K. We were able to recover this from our bank. Then another check we issued to a vendor was stolen out of their mailbox, Payee name washed and re created with the person’s name. This was for $769.32 and was NOT reimbursed to us. Both instances were over 4 years ago. But it does happen!
During the pandemic, we had 2 checks washed which were meant for vendor payments. We now use Positive Pay and I’m very grateful for that service. Everyone should use it.
We have had basically exactly the scenario you describe happen, learned the hard way and went to positive pay
Fortunately it was only about $2500
We deal in much larger amounts often
I have several business owner friends who have been hit as well
Thanks for making sure everyone is aware
We got hit on a 12k check recently where they did this. Luckily the bank was able to recover funds. Its unfortunate that banks do not tell their customers about positive pay.
Just signed up for Positive Pay. $29.00/month. Well worth the risk.