how to avoid fake check scams

How to Avoid Fake Check Scams

Fraudulent activities that target businesses thrive during economic upturns and turmoils alike. And they could take a variety of forms. Among them, check scams have been one of the oldest and most prolific swindles. In 2022, this type of fraud grew by a staggering 84% YoY to cross 460,000 reported cases.

The rising threat of check scams demands closer scrutiny by enterprises of all scales. Here is how you can avoid them and safeguard your business.

Build Awareness

To protect your company from fake check-related frauds, you first need to understand what they are and how they work.

For many people, they involve a bad check intentionally provided by a customer to acquire a product or service fraudulently. But these frauds can take place in countless other ways.

For instance, a dishonest customer can write a check exceeding what they should pay. They could then request your business to refund the excess amount with a wire transfer or gift card. Thinking it is a genuine mistake, you could hand over the extra payment to the customer without suspecting fraud.

Banks typically clear checks within two working days and, therefore, could indicate the relevant amount in your business account. However, it could be weeks before they find out the check is forged. Once they realize this, they will reverse the check value from your business bank account.

But the cost of this type of financial fraud is varied and potentially long-lasting. Apart from bearing the loss of what you have already paid the scammer, you could end up paying late-payment charges and other fees to the bank.

Your bank can also freeze your business account pending investigations or, worse, close it down. The incident could even negatively affect your credit score and financial credibility. As a result, your business reputation could suffer in the eyes of important stakeholders.

The bottom line is, a simple check scam could lead to damaging effects for your enterprise. Understanding the gravity of its impact is crucial for taking necessary precautions with due urgency.

Learn How to Detect Check Scams

When you know how to identify the common signs of check fraud, it is easier to avoid them. Here are a few important ways to recognize these scams:

Unusual checks

Sometimes, identifying a forged check could be challenging, even for bank staff. But experienced fraudsters can make mistakes, too. They can overlook important identifiers of a bank-issued document. As a result, certain omissions and errors could help you and your team detect a bad check before it is deposited.

For instance, authentic checks should have a perforation mark on one side. If the check you received has smooth edges on all four sides, then it is likely forged. Banks also use high-quality paper and insert the check number in two locations—typically on the top right and bottom right. These are simple things scammers could often fail to note.

There is also a routing number unique to each bank that is printed at the bottom. You can easily find out whether this number on a check is authentic by verifying it with the relevant bank.

Other signs to watch include checks issued by unfamiliar banks, misspelled bank names, and logo differences.

Unusual overpayments and refund requests

Overpaying for a product or service could be a genuine mistake. But it rarely happens. So, when a customer claims to have overpaid via check, it is necessary to investigate further.

Refund requests via untraceable methods, including cash, wire transfers, and gift cards, should be particularly treated with suspicion.

Strengthen Processes

You can identify most check scams by remaining alert and checking for the warning signs mentioned above. However, it is important to remember that not every fraud follows the same pattern or format. There will always be exceptions, and recognizing them may not be easy. But when you have foolproof systems and processes in place, you can avoid many of their advances.

Your fraud prevention policies should cover every relevant department, from sales to finance, and include all critical internal and external processes. Essential considerations include:

• Rejecting checks when the amount written on it does not match the required payment. In such cases, employees should request the customer to correct the amount.

• Accepting checks only from known and verified customers.

• Waiting until the bank clears a check officially before processing refunds for overpaid checks. Employees should never agree to a refund simply because the check amount appears on the bank balance within two working days.

• Removing checks from your accepted payment methods, where possible.

• Setting up a detailed payment and refund policy, indicating how a refund will be processed, how long it will take, and other relevant information. This is vital for managing customer expectations and safeguarding your business against check scams.

• Ensuring all employees are aware of the company policies and systems in place to prevent fraud.

• Assigning responsibilities to avoid overlapping duties among teams and linking them to individual KPIs.

Train Employees

Processes alone can’t protect your business from fraudsters. Your team plays an essential role in it, too. Therefore, training and educating them is an important step in fighting scams.

• Keep employees updated on the latest scam trends.

• Teach them how to identify forged checks.

• Train them on simple methods to verify customer details when they suspect fraud. For example, they can carry out a reverse number search on PhoneHistory to check whether customer names, contact numbers, and addresses match.

• Ensure employees escalate potential scam attempts and immediately flag the respective customers.

• If your business experienced check fraud, it is also important to alert the bank, Federal Trade Commission, and Internet Crime Complaint Center.

To Conclude

Despite the dwindling usage of checks, scams related to them are still rampant. Without sufficient protective measures, these types of fraud could expose your business to financial fraud and long-term reputational damage.

So, build awareness about how check scams work, learn to identify them, establish airtight systems and processes, both internal and external, and train employees to prevent fraud.

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