Check fraud - how to protect against it?

[paulney]

My wife and I run a small business, and we just got a scam letter in the email.

The usual: we are a company in India (Thoshiba Energy), and we got a purchasing request from Uganda, with payee as your company. Here's a scan of a check and authorization letter.

Scans were attached. I open them, and... wow! The check color is different, as well as the sequence number, but everything else is correct, including my own signature! WTF!

I guess someone on the list of payees either lost or deliberately gave an image of a real check to the scammers to produce a fake. The amount they put in is so huge, it would immediately set off a fraud flag at the bank. However, what if they make checks for just a couple of hundred dollars? That could fly.

How can you protect yourself from something like this? Not writing checks is not an option - you have to use it in the course of business. I guess, no one is insured from something like this?

 

[EagleKeeper]

1) Let the bank know of what is going on.

2) Make sure that the bank will rejects checks that fall outside a set of sequence numbers.

 

[paulney]

I found something called 'Positive Pay'. That could be a solution.

 

[BigJ]

It's one of the inherent problems with checks.

The kid working the register at Kohl's receives one of your checks and he's got free reign to try to get charges authorized to your account. They get that account number and they can be off to the races.

The only way to counteract this is to keep a balanced checking account.

 

[dullard]

Originally posted by: BigJ
They get that account number and they can be off to the races.

Yep. They get the name, address, account number, signature, and often the phone number and driver's license number all at once. Combine that with the fact that ANYTHING with that information can be used as a check. That is, you can write all that down on a napkin, and it is a legal document paying money from your account to someone else (assuming the signature isn't a forgery). I don't like checks for that reason.

Sure, the bank will help you. They have fraud detection capabilities. But, checks really leave you vulerable.

 

[BigJ]

Originally posted by: dullard

Originally posted by: BigJ
They get that account number and they can be off to the races.

Yep. They get the name, address, account number, signature, and often the phone number and driver's license number all at once. Combine that with the fact that ANYTHING with that information can be used as a check. That is, you can write all that down on a napkin, and it is a legal document (assuming the signature isn't a forgery). I don't like checks for that reason.

Sure, the bank will help you. They have fraud detection capabilities. But, checks really leave you vulerable.

It's actually pretty scary what information you have access to working in a cash office in a retail store.

On credit card applications, you have everything you need to go on a spree opening up new lines of credit, including Social Security #s. The amount of checks that come through, all it would take would be bringing them over to the copy machine.

 

[paulney]

Just to reiterate: it's not the personal checks I'm worried about (I don't think I used one in a very long time now).
It's the business checks. Unfortunately, business checks are still very much in place, and for a small business, a #1 paying option.

I think I'll purchase and install Positive Pay system as soon as I can. This should help a lot.

 

[pontifex]

nvm