A Foolproof (and Often Free) Way to Prevent Check Fraud

In recent times, the rise of fraudulent activities, particularly in the form of check washing, has become a growing concern for jewelry businesses. The Jewelers Board of Trade (JBT) understands the impact such incidents can have on its members. In response to a recent case where a JBT member faced the challenges of check fraud, we have discovered a foolproof and often free solution that can safeguard your transactions – Positive Pay.

The Check Fraud Challenge

JBT’s Collections department encountered a situation where a JBT member attempted to collect payment from a jeweler who had sent a check. Unfortunately, the check was intercepted enroute and cashed by an unauthorized party. This scenario, known as Check Washing, has become more prevalent with the decrease in mail volume, making checks easier to identify and manipulate. Resolving such cases demands significant time, effort, and resources involving coordination between the JBT member, customer, and the bank.

The Solution: Positive Pay

Banks have recognized the escalating issue of check fraud and have introduced a valuable tool called "Positive Pay." This service, available with most business checking accounts, acts as a powerful deterrent against fraudulent check cashing. While some banks may charge a nominal fee, many offer Positive Pay as a complimentary service, making it a cost-effective option for jewelry businesses.

How Positive Pay Works

1. Inquire with Your Bank: Check with your bank to confirm if they support Positive Pay and how to activate it for your account.
2. Create Checks as Usual: Generate checks using your preferred method, whether handwritten or printed from accounting software.
3. Enter Critical Information: Visit the bank's Positive Pay website and input vital details about the check, such as Payee Name, amount, and check number.  Some banks may offer the option to upload a spreadsheet, streamlining the process and reducing the need for manual entry for individual checks.
4. Automatic Verification: If discrepancies are detected when the check is cashed, the bank automatically rejects the transaction, preventing fraudulent activity.
5. Attention to Payee Name: Ensure precise matching of the Payee name, as discrepancies in names are the most common reason for check rejection.
6. Real-time Monitoring (Optional): Some Positive Pay systems allow real-time monitoring, giving you the option to approve or deny checks as they are presented for payment. Be vigilant, as the approval window is typically short.

Streamlined Integration

The good news is that many check writing services, including third-party bill paying services like Bill.com and numerous banks' online check writing/bill paying services, automatically incorporate Positive Pay into their workflow.  Additionally, Positive Pay services are often available for ACH transactions, providing comprehensive protection against fraudulent activities.

Conclusion

If you are unsure whether your accounting department is utilizing Positive Pay, it's worthwhile to inquire. The benefits of this proactive measure extend beyond financial savings, offering peace of mind and safeguarding your business from the rising threat of check fraud. Take control of your transactions and embrace the foolproof protection that Positive Pay provides – because the money you save may just be your own.