by Nicolas Williams, Lead Accounting Specialist
As a payroll company, we recognize that we play a crucial role in assisting our clients protect themselves against check fraud. In this post, I’ll discuss some steps every business and organization can take to combat check fraud.
We believe education and awareness is one of the most important steps both businesses and individuals can take in order to reduce the impact of check fraud. By adhering to best practices and taking advantage of technologies to help detect a problem early on, we can effectively reduce exposure to fraud, possible loss, and the inconvenience of being a victim of financial theft.
Check fraud occurs through various forms which includes counterfeit checks, forged signatures and altered checks. Authentic checks are often stolen, altered or replicated, and negotiated well before the client realizes there is a fraud issue.
The first step to reduce check fraud risk is to ensure that your organization is using a secure check design. Professional check printers, used or referred by a financial institution, offer security features on their checks. These security features may include watermarks, security ink and holograms. These features make it harder for fraudsters to replicate or alter checks.
Positive Pay is a service offered through financial institutions which involves the verification of each check against a client-approved list of issued checks before it is processed. If a check doesn’t match the list, it is flagged for further investigation. This helps protect against fraudulent checks being processed and debited to the account.
Regular bank account reconciliation using online banking access will help to detect any unauthorized transactions or discrepancies early on. Timely identification of fraudulent transactions allows for prompt action to be taken by the financial institution.
For those organizations who issue payroll checks, secure delivery methods are critical. While SDP provides secure delivery of printed payroll checks, clients should also distribute paychecks to employees in a secured manner who are not “on location” by using registered mail or courier services. The most typical cause of check fraud is through mail fraud, so avoiding using regular mail when providing checks to employees will greatly reduce your chance of fraud.
Using electronic payments minimizes the risks associated with physical check handling and may also be a cost-saving measure over issuing paper checks. Direct Deposit provides the safest option of payroll delivery as funds are sent to employees via electronic funds transfer. Payroll funds are directly deposited to their bank account, eliminating the need to issue a physical check. Always ensure that your employees are providing their Direct Deposit information in person if possible, or if you are using our SDP Connect Employee Self Service, have the employee input that information within the system on their own. Please Note: When processing your payroll on SDP Connect, you will always get a notification before submitting payroll that an employee’s Direct Deposit information has been changed.
An alternative to electric payments via direct deposit is to use a paycard service. With paycards, employees may conveniently receive payroll electronically and access their funds through the use of a pre-assigned card. Funds may be accessed via point of sale transactions with retailers, by withdrawing cash from ATMs, and to pay bills via online or a mobile app. Paycards eliminate the need for employees to have a bank account in order to receive electronic payroll payments and is also a cost-savings solution when compared to check cashing fees. SDP works with Comdata to provide paycards completely free for employers to use. Please feel free to contact us if you would like additional information about Comdata and their paycards solution.
Lastly, we encourage clients to develop a fraud response plan. Identify the organization’s individual(s) who are responsible for reconciling accounts and handling fraud incidents. This may include a payroll or HR manager, finance manager or other managers who are responsible for the organization’s financial health. Maintain regular risk assessments to ensure the organization is utilizing the most current fraud prevention and detection services available. Conduct trainings and be sure to include assessments of internal vulnerabilities to help protect against internal fraud as well. Establish procedures to address fraud that include a bank contact, phone number, and email address.
Ongoing training and awareness are essential. Fraud prevention, planning and daily management are the best methods to protect your organization from financial theft. We encourage our clients to work with their financial institution(s) to access the most current technologies available and to obtain the information needed to address concerns quickly.
SDP payroll professionals assist our clients with payroll fraud questions. To get started or learn more about SDP’s payroll solutions, simply contact us today.
And, for more information about Southland Data Processing, call us today at 909.946.2032. Or, click here and Let’s Talk!
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*Southland Data Processing, Inc. (“SDP”) is not a law firm. This article is intended for informational purposes only and should not be relied upon in reaching a conclusion in a particular area of law. Applicability of the legal principles discussed may differ substantially in individual situations. Receipt of this or any other SDP materials does not create an attorney-client relationship. SDP is not responsible for any inadvertent errors that may occur in the publishing process.