DOING ONE MORE THING TO PREVENT FRAUD
GUARDING AGAINST THE FAKE CHECK WITH POSITIVE PAY
By: Glenn D. Denton
Fake checks, sometimes called counterfeit checks, are on the rise. While electronic money transfers are ever increasing, many businesses still use paper checks. Endless stories have been written about wire fraud and business email compromise, but not enough publicity has been given to fake checks and what your organization can proactively do to protect itself.
The discovery or first notice of a fraudulent check can occur in several ways. At best, a bank discovers the check upon presentment. It gets flagged, investigated, identified as fraudulent and no monetary loss occurs. At worst, the fake check gets presented, deposited, identified after the fact as fraudulent and a monetary loss does occur. This second scenario begins the process of attempting to get the money back and assigning blame or liability.
If this happens to your organization, your very first step should be to call your bank and notify them. Time is of the essence. Contacting law enforcement will likely be next for you or the bank. Signed affidavits and police reports are common documents to first be needed. After that, attorneys often enter the picture. Denton Law Firm was recently involved with a matter surrounding a $9,000+ counterfeit check, which was a very good fake. The dispute was amongst the account holder, drawee bank, payee and depository bank. Not one of the parties was pleased to have been drawn into this dispute, which was all started by a paper check that was a complete fabrication.
The first phone call with your attorney will lead to a legal discussion and analysis of the Uniform Commercial Code, which is affectionately called the UCC. Terminology and phrases like comprehensive rights and remedies, Articles 3 and 4, Regulation CC, presentment, honor, ordinary care, common law, authorized signatures, unauthorized signatures, and reasonable diligence to discover suspicious activity will be used. Denton Law Firm attorneys can help your organization navigate these legal concepts and clarify what outcomes may be possible. We can also help your organization work with law enforcement in conducting an investigation.
However, the purpose of this article is to suggest that your organization be proactive and help itself. How? Pick up the phone, call your bank and ask these questions: (1) What is check Positive Pay? (2) Do you offer this service? (3) How does it work?
Generally, here are the answers you can expect. Check Positive Pay is a fraud mitigation service offered for commercial bank accounts. It allows your organization to proactively provide daily approval of checks presented for payment against your account. Most banks now offer this service, and it is all done electronically. Is it another daily task for you or someone in your organization? Yes. However, it is a daily task designed to protect against fraud. There will be a cost associated with the service, but it will likely pale in comparison to the amount of the fraudulent check that depletes your account.
Positive pay can be tailored in many different ways and it will take only a little research to understand more about this service. Our recommendation is that your organization get ahead of the curve. Embrace Positive Pay. It will add an additional layer to your organization’s fraud mitigation efforts. If your organization has been the victim of a fake check or you are interested in learning more about fraud mitigation strategies, such as Positive Pay, contact attorney Glenn D. Denton.