Shield Your Business From Check Fraud

In a world where money can travel at digital speed through the cloud, the use of paper checks as a payment method has continued to decline for more than a decade.

Yet, according to the Internet Crime Complaint Center (IC3.gov)¹, attempted check fraud has been increasing. In 2024, attempted check fraud rose to $16.8 billion – up from $12.5 billion in 2023—a nearly 35% increase.

This alarming trend should not come as a surprise, as the increasing security of digital payments has made paper checks a low-hanging fruit for fraudsters. They can be more easily stolen, duplicated, altered, or cashed illegally.

It gets worse for the victims of check fraud. Over the past several years, the liability for bad checks has shifted away from the bank to the check issuer. For a business to seek restitution from a bank that pays a fraudulent check, the business must demonstrate that it exercised “ordinary care” in issuing the check. Even though banks must also exercise ordinary care when paying on checks, the courts have placed a more substantial burden on the check issuer. In other words, businesses carry most of the responsibility.

Payee Positive Pay is a sophisticated fraud prevention tool offered by banks to protect businesses from check fraud. Payee Positive Pay addresses the vulnerabilities inherent in traditional check processing, where fraudsters exploit gaps through methods like check washing (chemically altering payee names or amounts) or forging checks. By requiring precise verification of the payee’s name and other details, it significantly reduces the risk of unauthorized payments. This is particularly vital for businesses issuing high volumes of checks, as manual oversight is impractical and error prone.
 

How it works

Payee Positive Pay operates by creating a secure, automated process for validating checks presented for payment against a list of authorized checks provided by the account holder. The process begins when a business issues checks and uploads a file to their bank containing critical details for each check, including the check number, issue date, amount, and payee name. This file, often in a standardized format like CSV, serves as a reference for the bank's verification system.

When a check is presented for payment, the bank's system compares the check's details, particularly the payee name, amount, and check number, against the uploaded file. If the details match exactly, the check is cleared for payment. If discrepancies arise, such as a mismatched payee name or altered amount, the check is flagged as an exception.

Some advanced systems incorporate additional security features, such as check image verification, where the bank compares the physical check's image to the details of the issued check. This multilayered approach enhances accuracy and reduces the risk of fraudulent checks slipping through.
 

Help safeguard your business

Payee Positive Pay stands out for its proactive approach to fraud prevention, stopping fraudulent transactions before funds are disbursed—unlike reactive methods that only address fraud after it occurs. This not only protects businesses from financial losses, legal complications, and reputational harm but also streamlines reconciliation by automating verification and reducing administrative workload. Its adaptability to evolving fraud tactics, including integration with real-time alerts and advanced analytics, ensures continued effectiveness.

As a technological cornerstone for secure financial management, Payee Positive Pay automates check verification, flags discrepancies, and empowers account holders with greater control, making it an essential tool for mitigating check fraud in today’s high-risk financial environment.

It's important to work with a local Treasury Management team that can align Payee Positive Pay with other services—like automated reconciliation, ACH controls, and real-time reporting to create a seamless, secure financial ecosystem. Their local expertise allows them to tailor tools to the specific needs of your business, ensuring maximum protection and operational efficiency.