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as bank that focuses on business we work with business leaders all day every day we have a front row seat to what's working and what has potential the first business bank podcast is dedicated to sharing insights to help you work better smarter and faster to achieve your goals let's get into the show hello i'm mark malloy ceo of first business bank i'd like to welcome you to another episode of the first business bank podcast today's topic is check fraud an issue that seems to be occurring with more and more frequency however it's something that can be prevented through attention to the details we're going to hear some eye-opening statistics and ways to stop it from happening today i'm joined by my colleagues alicia buchen treasury management expert with first business bank and teresa wiese managing director of compliance and risk management so let's get started alicia to you how prevalent is check fraud unfortunately check fraud is still one of the largest challenges facing businesses and banks today with the advancement of computer technology we have found that this has made it increasingly easy for fraudsters to manipulate checks the association for financial professionals puts on an annual payment survey last year numbers based off of 2019 74 percent of organizations experience check fraud which is up from 70 in 2018. total attempted check fraud increased to 15.1 billion dollars and accounted for sixty percent of attempted fraud against deposit accounts banks prevention measures have stopped 13.8 billion or 91 of the attempted check fraud check crowd accounted for 47 or 1.3 billion of industry deposit account fraud losses we within the bank have found that the most common types of check fraud are forgery theft and alteration also known as check washing paper hanging and check hiding and really just to add to what alicia has said from a first business bank perspective check fraud continues to be the number one fraud that we see we have multiple clients that continue to see check fraud and part of it is is our commercial clients especially issue a lot of checks which opens up a lot of opportunity for fraudsters to steal account numbers and re and reissue or counterfeit those checks so it's certainly something that is uh ongoing for sure theresa what trends are we seeing in check fighting how has it changed over the last five years yeah so thank you mark uh check fraud is like i said before first business bank is seeing it as the most common fraud and just industry-wide it continues to be the most common method of business to business payments and although check writing is uh slowly decreasing it still remains very common primarily because it's so easy to commit it's easy to steal checks or steal account numbers and then replicate a check the association of financial professionals note that 74 of businesses experience check fraud in 2019 and that was up four percent from 2018. so are attacks on businesses different than consumer check fraud we shall start with you absolutely for businesses we find that the monetary laws are much higher than on the consumer side many financial institutions including first business bank have commercial client standards within the terms and conditions of their deposit account agreement these agreements are provided to the clients at account opening and signing uh commercial client standards of care generally state that the bank offers products and services and security procedures that serve as precautions that the business must take to decrease the risk of unauthorized transactions these services include ach positive pay payee positive pay and account reconciliation the terms and conditions also know that should a commercial client fail to take reasonable precautions to mitigate the risk of fraud they hold first business bank harmless and they assume all liability again keyword here they assume all liability resulting from any losses or damages uh businesses must also notify their banks first business bank within 14 days of the statement being available the most common scenarios that we are finding right now include check fraud payroll diversion and bec so what about the consumer well the most common attacks for consumers are id theft which is where someone receives uh or steals an account number or other identifying information and and if they don't have the account number they may call the financial institution and try to obtain the account number information the other scenario that is fairly common is elder abuse in which an elderly person um again has has someone that pretext calls which is calling them and pretending um that they are either a relative or um that they are a trusted vendor like a bank or a doctor's office and ask for personal information and then the fraudster is able to create checks um and um purchase uh goods illegally off of an elderly person's account um the dollar losses are lower um typically uh you know they're smaller dollars but they may be much more detrimental to a consumer because it may impede someone from being able to pay a mortgage or rental payment or paying for medical bills or utilities or things like that so um the dollar amount may not be as large on the business side of things but it may be more devastating to consumers we should talk about how the pandemic has changed the way businesses pay third parties yeah thank you mark interestingly enough we have found that more of our clients at first business are starting to move towards digital or digitized payments as a matter of fact the association for financial professionals paired with american express has noted uh in the 2019 afp electronic payment survey that check usage for business to business transactions continues to decline with only 42 percent of the respondents making payments by check the survey also notated that the decline was not surprising given checks have a slower processing time and a higher transaction cost as mentioned before uh those of us within treasury management at first business bank have also seen a change in way our clients would like to make their payments to more of a digital method we have found that cutting a physical check has become more challenging due to the manual process and more and more employees are working remotely advantages to digitizing accounts payable include increased efficiencies and time savings improved payment accuracy realizing long-term cost savings and improved cash flow management according to the american express survey published in july of 2020 more than 35 percent of the respondents to the american express survey stated that the impact of the pandemic has made them consider changing how they process payments i know speaking personally as well for my colleagues at first business bank on the treasury management team we also during the months of march april may june and on did notice an increase of meeting with our clients virtually to discuss ways that we can help them find the efficiencies within their payment methods uh you know routine conversations about moving towards ach origination as a payment method turning on bill payment is another option that many of our clients did take that route as well yeah i know we've had unprecedented growth in really all the electronic payments services that we offer right alicia what should someone do if they suspect payment fraud on the business side yeah i'm going to talk about a couple of best practices but business clients should really be monitoring their account activity daily due to the quick return times they if they suspect fraud they should absolutely contact their financial institution immediately so from there we help them realize additional steps that they need to take such as filing a police report for online crimes involving counterfeit checks and money orders they will need to file a complaint with the internet crime complaint center also known as ic3 um they will likely need to file an insurance claim when their insurance company and then we all always stress implementing best practices if they don't already have in place first step review account activity every day i know i have already mentioned that segregation of duties dual controls setting up business e-banking and mobile banking alerts and sign up for bill pay or ach origination go electronic as much as possible to reduce the number of paper checks that you have floating out there good thanks teresa what about the consumer well it's really very similar to the business side of things that alicia already mentioned um i can't stress enough that the the best thing that a consumer and a commercial client can do is monitoring their accounts so reviewing account activity every day contacting the bank uh as soon as possible if there's something that's unusual um on the account reconciling their their monthly statements um i encourage clients uh consumers and businesses to go electronic as much as possible so uh bill payment uh is a good way to go also for reoccurring payments typically your third parties like your utilities credit cards will all offer to have your account debited every month i would encourage people to do that the ftc so the federal trade commission has really good resources and has a place to file a complaint if you are a victim of check fraud and they use the u.s postal inspection uh service uspis.gov website also has good resources especially if you know that the check was sent through the mail that the us postal service can help with that kind of crime and then um alicia mentioned this as well but if it's an internet uh crime involving like a counterfeit check or money order ic3.gov is a really good resource um so those are the primary ones but again just monitoring your account on a daily basis and contacting your financial institution if there's anything that's out of the ordinary is really best practice good good thanks great information so alicia what are some of the early warning signs of fraud yes uh so one thing we always recommend for business clients is to scrutinize not only checks that they are sending but also receive for payment to deter deposit fraud um does the address on the envelope match the maker of the check was it an expected check are there any other red flights on the physical check that you received bills or statements unexpectedly stop arriving in u.s mail this could mean that an identity thief has taken over your account and changed your billing address uh checks are significantly out of order on your bank statement notification that you've been denied credit or you didn't apply for credit debt collectors contact you about merchandise that you didn't buy receiving notice from a vendor that you are passed due on a payment that you know you sent notifications about address password or information that you didn't make those are all great signs of fraud on your account good thanks so now we talked about this a little bit before but i want to kind of circle back to it what are some of the tools that are out there to help businesses and individuals prevent check fraud we'll start with on the business side alicia yes i know we cannot stress this enough but get enrolled in business online banking and make sure you're reviewing your account activity daily set up account alerts download the business online banking app implement fraud protection tools such as check positive pay or payee positive pay or even post no checks restriction on deposit only accounts i implement account reconciliation make sure you have the business e-banking and mobile banking alerts convert reoccurring paper payments to electronic and lockbox is always an option as well teresa on the consumer side yeah it's um it's it's very much what alicia said it's online banking looking at your account on a daily basis setting up alerts um there's typically with online banking there's many different kinds of alerts that you can get whether it's low balance or a particular debit or particular check things like that also mobile banking um you know looking at areas of activity through mobile banking is a good example of uh ways to just monitor your account and then credit monitoring service looking at your credit reports you can get it at least annually and i know that now during that pandemic you can get a free credit report from the three reporting agencies on a monthly basis so looking at your credit making sure that you understand uh what is on there and notifying any one of the credit bureaus if there's something that that doesn't belong to you are good examples good thanks so talk about bank products or services that can help but what are practices or actions that individuals either as a representative of business or as a consumer can do to mitigate risk as well we shall go to you first thank you mark i like to more um ask it as a question for businesses this is something we like to review quite often with our business clients um first one does your company review your transaction activity daily does your company have up-to-date controls in place to prevent fraud do you have first business banks pay positive pay service in place do you order checks and deposit slips wisely from a reputable business does your company maintain adequate physical security of checks and deposit slips does your company consistently review issue checks and reconcile them within a timely manner does your company practice segregation of duties do your employees participate in ongoing fraud education to stay on top of the latest trends does your company test its fraud health and how often does your company have the appropriate appropriate financial institution provided fraud protection solutions in place as previously mentioned for checks pay you positive pay or post no checks does your company have a cyber security insurance policy in place to transfer the risk when was the last time you reviewed your insurance coverage and lastly what's your incidence response plan is it up to date good thanks teresa what would you say to the consumer well one is to keep your checks stored in a secure location lock them up or at least put them so that they're out of sight reconcile your bank statements within 14 days of receiving your statement in contacting your bank if there's any anomalies on that bank statement never give your account number out to uh someone that's calling or emailing you for that information you know beware of unsolicited phone calls or unsolicited email inquiries when you receive if you reorder checks and you receive your check order make sure that there are no checks that are out of sequence out of order um you know if god forbid your home is burglarized uh make sure that your checks have not been stolen and that there isn't any num check numbers that are out of order don't mail bills from your mailbox we've i've already talked a lot about that and and it's best if you're mailing checks if you just take those payments directly to the post office limit the amount of personal information on your check you know never include your date of birth your social security number driver's license telephone numbers anything like that don't leave blank spaces on your checks when you're writing their checks that if you do people could add their names to the front of the checks as a payee don't make a check payable to cash um if a check is lost or stolen make sure you contact the bank to put a stop payment on the check um and then just you know always be alert to keeping your account number private and secure and not giving it out to anyone that's unauthorized well alicia and teresa thank you for taking time to share your thoughts and experiences with our audience today and to all of you our audience thanks for listening in on the conversation we hope you found the topic helpful and applicable to your company into your own mitigation of the risks associated with check fraud let us know if there are other topics or information you'd like to hear about and please join us the next time on the first business bank podcast if you want more content like what you just heard delivered straight to your inbox go to first business bank firstbusinessbankpodcast.com and if you haven't already make sure to subscribe to the first business bank podcast wherever you listen to podcasts if you're listening on apple podcast please leave a quick rating of the show thanks so much for listening first business bank member fdic