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It is widely believed that businesses are the
primary target of check fraud professionals, especially by organized
rings of criminals. As far as counterfeiting and alteration, payroll
checks appear to be a favorite although any form of a business check can
be targeted. Fraud professionals have become increasingly skilled and
sophisticated, thanks to advances in technology, such as personal
computers, scanners, and color photocopiers. Poor internal controls
can lead to collusion between employees or a third party who may copy,
steal, alter, or forge checks. A combination of precautions can greatly
reduce the likelihood of check fraud for a business.
The Code of Virginia states that a person
whose failure to exercise ordinary care substantially contributes to the
alteration of an instrument or forged signature on an instrument,
precludes them from asserting the alteration or forgery against a
person that in good faith pays the instrument or takes it for value or
for collection.
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ORDERING CHECKS AND DEPOSIT SLIPS |
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Order checks and deposit slips from
a respectable source, especially those recommended by your
bank. Checks should include security features within the design
of the check that will help combat counterfeiting and
alteration. Ordering checks without security features could
increase your liability on check fraud losses. |
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Notify your bank or check
supplier if a new check order is not received within a
reasonable time period after ordering. Checks could have been
stolen. |
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Do not order check numbers
previously issued. |
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MAINTAIN PHYSICAL SECURITY OF YOUR CHECKS AND DEPOSIT SLIPS |
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Secure all reserve supplies of
checks, deposit slips, rubber stamps, and other banking
documents (such as bank statements) in a locked facility. Limit
the number of people with access to the checks. Failure to
secure checks and other banking supplies can increase your
liability for losses. |
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When a new supply of checks is
received, verify all checks are present and place in a locked
facility. Do not leave blank checks unattended. |
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When an employee leaves, change
the locks on your facility. If checks fall into the hands of
unscrupulous employees, you could be liable for substantial
losses. |
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If your office was burglarized,
check your supply of checks to determine if any have been
stolen. Look closely, because they may only take some from the
middle or back of a book. Notify your bank immediately if any
checks are missing. |
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ISSUING AND RECONCILING CHECKS |
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Assign accounts payable
functions to more than one individual, making each one
responsible for different areas. Separate check writing and
reconcilement functions. |
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Limit the number of official
signers. Notify the bank immediately when there is a change in
your authorized signers. You don’t want a former employee (that
may have taken some checks) to retain authorization to sign the
checks. |
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Reconcile your account promptly
and regularly. Quick fraud detection can increase the chances
of recovery and if discrepancies are not discovered for months,
the account holder can become liable for losses. |
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The safest place to mail your
checks is at the post office. Do not place checks in a mailbox
for the next day. Checks can be stolen from mailboxes and the
blue postal mailboxes placed on streets. |
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Be careful what banking
information is placed in the trash. Shred information. |
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Issue checks in proper order.
Do not skip a book or issue out of order. |
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EMPLOYEES |
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Make sure you know
whom you are hiring to handle your money. Diligent reference
and background checks on all employees are important. |
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Conduct random
audits and enforce vacation policies. |
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Have employees
bonded. |
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