Checks have dominated the payment landscape for literally hundreds of years and served as an effective, necessary form of commerce the world over. However, as one of the oldest forms of currency still in use, they have become ripe for fraud. Checks are easy to forge, so it comes as no surprise that they remain the number one target for fraud scams year after year, presenting an ever-growing challenge for businesses and financial institutions.
Prevalence of Check Fraud
According to AFP’s annual Payments Fraud and Control Survey Report, paper checks are fraudsters’ target of choice, with 74% of finance professionals reporting that their check payments were targets of attempted and/or actual payments fraud.
Tampering with checks is among the most profitable AP fraud schemes, which when done well can be as hard to catch as it is easy to perpetrate. It’s important that account payable teams be vigilant and keep an eye out for these types of attacks.
Catching and Protecting Against Check Fraud
One way to monitor for potential check fraud is to identify missing check numbers or gaps in reconciled check numbers, which is usually indicated on the bank statement, to validate that check numbers are or are-not in sequence.
Another way is by setting up Positive Pay, a feature offered by banking institutions to provide additional safety measures to ensure that the check sent to someone matches the one being deposited. However, AP staff must diligently send their bank a file listing check numbers, dates, payee name, and amounts of all checks issued within a period. When the payee attempts to cash or deposit the check, the bank has a record and is able to check it with the Positive Pay information submitted and is able to notify the payer of any discrepancies. If this route sounds laborious – that’s because it is.
Leveraging AP Automation and Virtual Cards
Businesses today can also leverage AP Automation and virtual cards instead of paper checks to protect against fraud. Virtual cards provide fraud protection by making it safer for your business to make online payments with “credit cards” through a process called payment tokenization. This process allows personal account information to remain confidential and instead assigns randomly generated numbers and letters that replace traditional credit card numbers. The tokens can only be charged one-time and only for a specific assigned amount. Through tokenization all account information and details remain protected and have no value outside of their one-time use.
AP Automation technology makes it easy to streamline the process of paying with virtual cards by centralizing the AP process.