Fraud Insurance Coverage
We strongly recommend checking with your insurance agent to see if fraud coverage is available to your business. If you already have fraud coverage, regularly review your policy with your agent to ensure you have the proper coverage.
Check Fraud
We are seeing a significant increase in check fraud, particularly for businesses. We have noted that even local checks are being cashed all over the United States. Business check fraud occurs when someone uses fraudulent or stolen checks to steal money from a business or an individual. This type of fraud can occur through various methods, and perpetrators often exploit vulnerabilities in the check handling processes. Most recently we are noticing the following forms of check fraud:
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- Stolen Checks: Criminals may steal blank checks from a business or an individual. This theft provides them with the physical checks to manipulate.
- Forged Signatures: Fraudsters may forge signatures on checks, either of authorized signers within the business or even the payee's signature.
- Altered Checks: Criminals alter the payee's name or the check amount to divert funds to their accounts or associates.
- Counterfeit Checks: Perpetrators may create counterfeit checks that appear genuine, often using high-quality printers and check stock.
- Check Washing: Criminals use chemicals to erase and alter the ink on checks, allowing them to change details like the payee or the amount.
- Mail Theft: Intercepting mailed checks before they reach their intended recipient is another method used to commit check fraud.
No system is entirely foolproof, but a combination of the following measures can significantly reduce the risk of falling victim to business check fraud.
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- Secure Checks: Keep your checks in a secure location, and limit access to them within your organization.
- Use Security Features: Use checks with security features like watermarks, microprinting, and security inks that make them harder to counterfeit.
- Monitor Accounts: Keep an eye on your accounts for unusual or suspicious activity and report any discrepancies to your bank promptly.
- View Check Images: It is vital to view the check images in online banking and verify the payee along with the endorsement.
- Regular Reconciliation: Reconcile your bank statements regularly to detect unauthorized transactions promptly.
- Positive Pay Service: Consider using a positive pay service offered by your bank (Premier Bank offers this service), which can help detect and prevent fraudulent check activity.
- Use Electronic Payments: Consider shifting to electronic payments like ACH transfers or online bill pay, which are generally more secure than paper checks.
- Educate Employees: Train your staff to recognize fraudulent checks and provide guidelines on what to do if they suspect foul play.
- Use Secure Mail: When mailing checks, use secure and traceable methods to reduce the risk of interception.
Wire Fraud
Management or finance department e-mail accounts are hacked and subsequently used to send fraudulent wire requests to appropriate staff with wire authority within your company. Those staff members are not making phone calls back to the requestor to verify the request is legitimate. The staff member proceeds with sending wire request to the bank. Once this money is sent by the bank, the funds cannot be recovered, and the business incurs the entire financial loss.
Best Practice: Do not trust e-mail or text message requests from coworkers for payments and transfers, especially wires. Always make a phone call back to the requestor or speak with them in person if possible. Verbally confirm the dollar amount and destination of the funds.
Invoice Fraud
Invoice fraud occurs when a fraudster sends a notification to your company that the vendor’s payment details have changed and provides alternative details to send future funds. This could also occur by sending your company a fake invoice with payment details different from the standard invoice you receive from that vendor.
The fraudster is claiming to be from your company’s genuine supplier or possibly an internal employee asking you to pay the invoice. Funds are often quickly transferred so recovering money from fraudulent accounts can be extremely difficult.
Best Practice: Confirm details of any new or amended payment instructions verbally with appropriate vendor contacts on file. Maintain a trusted spreadsheet or list of vendors with their appropriate contacts and payment details and reference the list when sending payments. Never trust new instructions provided via e-mail, letter, or invoice.
Payroll fraud
This typically involves a letter, phishing e-mail or hacked e-mail account where the scammer pretends to be one of your employees. Names of employees within your company can easily be obtained from social media, company websites, and circulating e-mail lists on the internet. The e-mail will request will be sent to your HR or accounting staff involved with payroll. The request includes instructions to change the address or bank account information in which to send future payroll checks or deposits.
Best Practice: Once again, do not trust e-mail, letters, or text messages from employees requesting payroll changes. Utilize an approved internal form for these requests and verify verbally whether in person or return phone call.
Please stay vigilant and adopt best practices to keep your business safe!
