When you think of check fraud, the movie “Catch Me If You Can” may come to mind along with assumptions that this was a crime of the past. Unfortunately, in the last few months alone, some of our customers have experienced the business check fraud scams below. Chelsea Groton offers tools to help customers mitigate fraud. Unfortunately, fraudsters are getting more and more creative, so we all must work together to have the best chance against this crime. Here are a few first-hand stories of recent schemes in the hopes that by shedding light on the scope of these fraud events–and providing proactive solutions–we can prevent others from being targeted:
Scheme #1: Counterfeit checks were written against the business customer’s account. Each check was for a dollar amount that was consistent with the check sizes of the customer’s historical orders, so the amounts were not suspicious. The customer became aware of the fraud when reviewing their account online and realized it was overdrawn. The fraudsters had amassed $35,000 in counterfeit checks by issuing a total of 39 checks; 9 or 10 checks posted each day for several days until the account had been drained.
What You Can Do: The Bank’s Positive Pay fraud service detects fraudulent checks such as the ones written against a customer’s account. In this case, the fields of information would not have reconciled against the legitimate check payments made by the company and would have been flagged for our customer to review on the business day after they were presented for clearing against the account, which would’ve allowed the Bank to return them in a timely manner for no loss to the customer. Remember: Business accountholders should report fraud to the Bank no later than noon on the business day after the item clears for the Bank to assist in recovering funds, so it’s critical that accounts are monitored closely and reconciled daily.
Scheme #2: There have been numerous news reports of US postal workers stealing checks or postal workers being jumped for their keys to the blue post office bins so fraudsters can steal checks. The fraudsters then forged endorsements on the back of checks and deposited them, likely via a mobile app, into bank accounts at different financial institutions in other geographical areas. In one instance, the customer only became aware of the forged endorsements when contacted by their vendor to ask why payment had not yet been received. In these schemes, the funds are quickly withdrawn and the account is closed shortly after the funds are made available before the fraud can be identified and the depositing bank can be notified. The fraudsters subsequently used the check information they had obtained from the legitimate checks to create new counterfeit checks which they began writing off the customer’s account.
What You Can Do: Be sure to examine both the front and the back of check images when reviewing them in the online banking system or on your bank statements. If you have any suspicions about the signature, compare with the endorsement of a prior check to the same vendor. Checks to large companies will not be endorsed with an individual’s signature. The sooner you can catch any anomalies, the better. In the case of forged endorsements, the bank that accepted the deposit is responsible for returning the funds to the issuing bank’s customer, but it can sometimes take months for the case to be investigated, resolved and the funds returned. In addition, this customer enrolled in the Positive Pay Service after identifying the forged endorsements, which successfully caught the subsequent fake checks the fraudsters attempted to use. This prevented the customer from having to close the existing account and open a new one, since the Positive Pay account was safeguarded from fraudulent checks clearing the account.
Scheme #3: Numerous local businesses have reported that checks they accepted as payment for goods and services were subsequently returned as fraudulent. The checks were deposited with immediate availability. These merchants sold vehicles, jewelry, or caught up on business expenses. The checks were subsequently returned unpaid, which meant that not only was their business account debited for the amount of the check, but they were also out the product they sold.
What You Can Do: Do additional due diligence on new customers or vendors and do not release product until at least three business days after depositing the check. While the bank may give immediate availability on check deposits, this credit is provisional pending final settlement of the check. If possible, collect payments electronically via credit card, ACH, or wire as these channels are more secure. If you are the victim of a deposit scam such as these, notify local law enforcement authorities.
Here are several resources and reminders to protect yourselves and your business:
- NEVER provide your personal or business information, personal identification numbers (PINs) or passwords to anyone, even if the person claims to be from Chelsea Groton Bank. Hang up and call Chelsea Groton’s Customer Care Team or your banker directly. Remember, the Bank will NEVER call you and ask for this type of information.
- Only do business with companies you know and trust. Never click on unfamiliar links or correspond with unfamiliar email addresses. If unsure if an email is authentic, contact the sender through the known and verified email address or phone number you typically use to correspond with that individual or business. Conduct additional due diligence on new clients. Limit payments accepted via check and instead collect electronic payments through credit card, ACH, and wire.
- If your company uses credit card terminals to do business, it is recommended that terminals remain locked in a secure location when not in use. Numerous local merchants have reported card skimmers that were attached to their terminals. Skimmers are devices attached to credit card terminals in which a hidden camera is attached to the credit card slot to capture card numbers and PINs. Scammers later recover this information to make fraudulent purchases. To protect your customers’ card information, do a daily inspection of credit card terminals for any unusual attachments.
- Take advantage of online and mobile banking alerts and push notifications for high risk or high value transactions. Alerts such as “Large Check Cleared,” “Large Withdrawal Posted”, “Current Balance Below Limit”, and “Available Balance Daily Snapshot” can help bring this to your attention more quickly if you don’t otherwise scrutinize your account daily.
- Be sure to monitor your statements daily. Don’t just monitor that a check has cleared, open up the image to ensure it was delivered to the proper recipient. Business accountholders should report fraud to the bank no later than noon on the business day after the item clears for the bank to assist in recovering funds, so it’s critical that accounts are monitored closely and reconciled daily. Chelsea Groton also offers a Positive Pay service to help mitigate check fraud.
- Monitor entitlements and permissions given to all employees, and review frequently. Ensure each individual (even the most trusted ones!) has a unique login and has the lowest level of access required in order for them to do their job. Learn more about online entitlements.
- Never trust wiring instructions sent via email. Cyber criminals are hacking email accounts and sending emails with fake wiring instructions. These emails are convincing and sophisticated. Always independently confirm wiring instructions in person or by phone with a trusted and verified phone number. Chelsea Groton’s Wire Transfer Service provides businesses with an efficient, streamlined and secure wire transfer experience. If fraud is detected, contact your bank, local police, and if you have cyber insurance, call the insurance company right away.
Please contact Chelsea Groton’s Cash Management team at 860-448-4295 or growthatbusiness@chelseagroton.com to learn more about the Positive Pay Service and other free online banking tools, such as Alerts, that can help you monitor and secure your account.
