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How to Protect Yourself From Fraud by Using ACH Positive Pay

Part of running and owning a business is ensuring that your employees and customers do not commit fraud. Check fraud occurs every day in the United States, but there are check fraud prevention methods that you can use to keep your business safe such as using solutions for ACH transactions or having a positive pay file. Learning more about the common types of fraud will help you to prevent others from using your business to commit fraud.

What Is Check Fraud?

Before you look for an answer to what is positive pay, look at some of the common types of check fraud, such as check kiting. This is when someone floats money between two or more accounts. They put money in one account and write a check from that account to deposit it in a second account. By the time the check comes due, the first account is empty. Paper hanging is another example of check fraud. This occurs when an individual writes a check from a drawn or closed account with the knowledge that they don’t have money to cover it.

Business owners also need to be aware of forged checks. Someone can steal checks from another person and use them to obtain cash or pay for goods and services. If the business does not compare the name on the check to the individual’s ID, they may accept the cash and lose money. Fraud can also involve identity theft, which is when an individual steals another person’s personal data. Identity thieves can even gain access to the accounts of others through different tactics that make it seem as if they own those accounts.

You should also alert your employees of the cashback scam. Scammers use this method to get products from shops and individual sellers. For example, you might see a television online and get an offer from a local buyer. The buyer agrees to purchase the TV for your price but offers to write a check for more than that amount. If you sell it for $300, the buyer might offer $500 for your convenience and ask you to give them $200 back. By the time you try to cash the check, the buyer will have both your money and the TV while leaving you responsible for the bank’s overdraft fee.

Businesswoman Checking Documents With Fraud Board on Desk

How to Prevent Check Fraud

Positive pay and other methods can help your business prevent check fraud. You and your employees should always examine checks for signs of alterations, such as changes to the account and routing numbers printed on the bottom or the name printed on the top. It’s also helpful to look for signs of counterfeit checks. Scammers often create counterfeit checks with the information that they find or steal from others. If the check does not have magnetic ink character recognition on it, it’s not real. 

You can often run your hand across the check to make sure that the printing feels raised, which indicates that it came from a bank. Home printers cannot create those raised impressions. Using a positive pay check is the best way to be sure that the check that you’ve received is authentic.

Check fraud prevention methods also include paying special attention to the checks that you accept. If the check feels slick or slippery, it’s likely a fake. Fake checks also have routing and account numbers that do not match or lack a printed name and address on the top. As it’s often hard to spot the signs of fake checks as technology changes, using a positive pay check is a better way to keep your business safe.

What Is Positive Pay?

Positive pay is an easy and convenient way to ensure that the checks you accept will clear the bank. It stops you from taking checks with any alterations and reduces your risks of taking other types of bad checks. With a positive pay file, you have the chance to check every payment that you receive before you attempt to cash or deposit it.

You might look at what is positive pay because you want to know how it works. When you receive a check, enter your positive pay check account. You need to enter the name of the payee and the amount written on the check along with the date on the check and its number. This allows the bank to quickly compare the name on the check to the name on the account and make sure that the names match. The bank will also verify that the account has enough cash to cover the check.

Another benefit of using positive pay is that you can find out if the check was altered in any way. If any of the information on the check does not match the information held by the bank, you know that the check is fraudulent. This gives you the option of taking cash as payment or asking for another form of payment. You may notice some red flags that stop you from cashing the check.

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Using ACH Positive Pay

Check fraud accounts for more than $10 billion in losses every year.[1] Thanks to check fraud prevention methods, you can easily protect your business from financial scams and losses. With this type of positive pay file, you can list how many financial transactions you want to make every day on your business account. If someone attempts to write or cash a check outside of those you listed, it sends out an alert that lets you know that someone tried to access your account.

You also receive alerts of anything suspicious. This can include a check written for a larger amount than you ever used before or a check written by someone not listed on your account. You’ll also receive alerts if others try to cash checks written to them that you never worked with before. You have the chance to allow the check to go through or put a stop to it.

Another benefit is that you don’t need to do anything special to stop the check. If you do not respond to the alert you receive, the check will go back to the original person or business without any money leaving your account. 

Cashing even one altered check can leave you dealing with significant losses. You may suffer losses because of an unauthorized user who gains access to your account too. If you want to know how to protect your business against those losses, contact today. Our team can easily help you sign up for a new program that works with your existing bank account. You’ll instantly know when someone tries to cash a check in your business name or when someone tries to give you a fraudulent check. Contact us today to learn more about how these services help you prevent check fraud.