5 min read Old School crime is back and check fraud is surging. A Federal Reserve survey of risk officers found that check fraud accounted for 30% of all total fraud losses in 2024, and the number of financial institutions that experienced attempted check fraud grew by 10% from 2023 to 2024. Simply search the term “check washing” into any search engine and you will discover how impactful this crime has been on business owners. Check fraud requires no tech sophistication at all. Fraudsters are able to pull of check fraud using basic technology like scanners to duplicate checks or simply stealing checks from the mail. Thankfully, businesses are turning to digital payments and electronic alternatives like card and ACH. Unfortunately, some business owners are committed to paper and use checks as part of their daily operations. While ACH requires additional homework like obtaining the beneficiary’s account information and routing number, it is still one of the cheapest forms of payment. You determine the effective date of payment and you eliminate the opportunity for check fraud. Every time you write a check, your account number is displayed on the check. Think about the balance in your account -- Is it worth the risk? Also taking into account the expense of the check itself and the cost of the envelope and stamp, prioritizing digital payments should be an easy choice to make if you are in a position to change your method of payment. What is Positive Pay? Positive Pay is a technology that allows you to manage your payables and protect your account from unauthorized transactions or altered checks. Leaning into technology like Payee Positive Pay will prevent fraud before it occurs. How Does it Work? When a business issues checks, it sends the bank a list of authorized checks with details like check number, amount, date, and payee. When a check is presented for payment, the bank compares it to the authorized list. If there’s a mismatch, the bank alerts the business before processing the check. This verification process helps prevent forged, counterfeit, or altered checks from being cashed. If you implement Payee Positive Pay and a fraudster changes the amount or payee name, you can reject the payment before it is presented for payment. Another great feature of a robust Positive Pay service is the account reconciliation tool. The efficiency of your reconciliation process is extremely important to your own internal process. Any errors identified by your CPA after the event and not initially by your internal team point to an inherent weakness in your internal control environment. By having the account reconciliation feature at your fingertips, as a business owner or Controller, you will know in an instant outstanding checks, void, issued or paid checks. Account reconciliation should be an integral part of your process. Positive Pay Benefits Reduce risk of fraudulent checks being processed Detect discrepancies early before any funds are withdrawn, preventing potential losses Manage payables in one place, preventing errors and saving time Know that each check is verified, so you can focus on running your business Is Positive Pay Right for You? Before deciding whether Positive Pay is the right fit for your business, it’s important to evaluate your exposure to check fraud. This means looking beyond just how often you write checks. Consider the overall risk profile of your payment processes. A thoughtful risk assessment can help you determine whether implementing Positive Pay is a smart move for protecting your financial operations. Use the following factors to guide your evaluation: Quantitative Risk Factors Volume of transactions Dollar value of transactions Normal account dollar balance Qualitative Risk Factors Complexity of transactions Fraud susceptibility of transactions Level of manual processing vs automation Regulatory oversight Quality of internal control over transactions Positive Pay FAQ What is Payee Positive Pay and how is it different from standard Positive Pay? Payee Positive Pay is an enhanced version of Positive Pay that adds an extra layer of protection by verifying the payee name on each check. While standard Positive Pay checks for details like check number, amount, and date, Payee Positive Pay ensures that the payee name matches the authorized list provided by the business. This helps prevent fraud where a check’s payee name is altered, allowing businesses to reject suspicious checks before they are processed. How can I implement Positive Pay at my business? We're here to help. Just contact one of Treasury Management specialists at 877.539.4838. What should I do if I suspect check fraud? For many business owners, moving away from paper is not always so easy, and ruling out paper altogether can be difficult. If you do continue to write checks and you suspect fraud, here are some key steps to take: Contact your Bank immediately. Take a hard look at your own internal procedures Work with your Bank to implement either a more efficient electronic means of payment and apply a paper debit block to avoid any paper presented on your account Protect your account by implementing Positive Pay. Yes, you can close the account and reopen a new account, but you may simply delaying the inevitable and if fraud happened once, it will more than likely happen again Report it to the Police and complete a fraud affidavit. -- Please know if you write one check or a thousand, it only takes one fraudulent check to disrupt your cash flow significantly.
