Bento For Business

A Check Fraud Case Study

How Check Fraud Can Sabotage Corporate Interests

Business fraud takes many forms, and companies need to employ various strategies to fight them all. Some entrepreneurs view check fraud and forgery as unlikely occurrences, but trusting your employees or partners isn’t a substitute for real protection. Could your checking practices be putting you at risk? Check forgery isn’t just a technique that identity thieves use to catch consumers unawares. As one accountant with two decades of experience discovered, the consequences of fraud have the potential to cripple small companies.

The real consequences of check fraud and other forms of embezzlement

After leaving her accounting job at GM, Carole Maddux struck out on her own by founding a small firm. In 2010, however, she discovered that criminals had targeted her business by cashing false checks using one of her clients’ accounts. These fraudsters attempted to steal some $15,000 in total. Although Maddux was able to persuade the bank to reimburse her, it took two days and a police report. Tellingly, she had to file the report herself because the bank neglected to take action even though its tellers were the ones who initially notified her of the potential scam. Maddux was lucky enough that her clients didn’t blame her. Still, these events could have easily jeopardized her company’s standing, and she was never able to determine how they had been able to falsify her signature on the fake checks.

Understanding modes of small business fraud

Carole Maddux’s story isn’t unique: Many startups fall prey to misplaced trust. These problems are particularly problematic for entrepreneurs whose organizational structures blur the lines between close friends, family members and business associates. According to 2014 data from the Association of Certified Fraud Examiners, or AFCE, small businesses with less than 100 employees exhibit the greatest victimization rates of all companies. How do such incidents manifest? Check fraud and tampering accounts for 22.1 percent, which is a significant jump from the 6.8 percent rate observed in organizations with more than 100 employees.

Trust issues

Family-owned enterprises are by no means immune. In fact, these firms commonly suffer from the same kinds of licentious acts that employees who aren’t related to the company’s leaders commit, such as fraudulent check writing. Unfortunately, some police departments are wary of getting involved in what they regard as family disputes, so prevention is the best option for such companies.

Potential check fraud remedies

To deal with false checks, experts recommend techniques like implementing periodic unannounced auditing. When performed by a reputable third party, this form of surprise financial verification can deter future fraud theft or catch people in the act. Some business owners also reevaluate their checking account usage habits. For instance, eliminating inherently insecure signature stamps and demanding that high-value checks include two authorized signatures might increase the difficulty of forgery. The problem with such remedies is that they also heighten the effort required to make payments.

Overcome check fraud

Updating to modern payment methodologies is an effective alternative to work-intensive fraud prevention methods. For instance, prepaid cards like Bento for Business are FDIC-insured and lessen the likelihood of check fraud by reducing the need for traditional checking— with the added security of SSL-encryption for any and all interactions with your account. These tools also feature out-of-the-box integration with mobile monitoring software and programmable alerts to keep business owners informed in real time.

Keeping up with check forgery is a serious challenge for small businesses. Although a big firm might be able to absorb the costs of a fake check or the expenses associated with pursuing a fraudster, such events could sink startups and companies that are already struggling. Adopt a firmer stance against fraud by minimizing your reliance on checks with Bento for Business. Learn how by filling out our lead form and starting your free 60-day trial. If you have any questions, call our highly-rated and regarded support staff at 866.220.8455.

Check Out Our Business Fraud Calculator – See What Your Fraud Risk Is In One Minute

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