When It Comes to Check Fraud, Think Positive (Pay)

A Forger in France

It’s Christmas Eve, 1967 and the night is peaceful in the tiny village of Montrichard, France, the only sound the carols pouring from the church’s open doors. A young Frank W. Abagnale Jr., a clever conman on the run, is in the darkened print shop, working the behemoth press, printing his own checks, checks so perfect—with flawless 1/16ths all the way around, seamless color separation, and real heft—no one can tell the difference.

Except dogged FBI agent Carl Hanratty, who is here—after a 5-year-long chase that took him halfway around the world—to arrest him. Of course, there was no other way for this to end. At least, that’s how the film Catch Me If You Can portrays it.

Nonetheless, Abagnale was one of the most famous and daring imposters, check forgers, and escape artists in U.S history. He posed brilliantly as an airline pilot, doctor, professor, attorney, and more, all the while forging and cashing $2.5 million in phony checks in the United States and abroad—and he did it as an adolescent, from ages 16-21.

Thankfully, Abagnale is now working for the good guys and is recognized as a preeminent authority on forgery, embezzlement, and secure documents. Check fraud, however, is still rampant. A staggering average of 1.2 million fraudulent checks enter the system every day and losses are growing 2.5% annually (American Bankers Association). That’s why there’s Positive Pay.

An Introduction to Positive Pay   

Often combined with reconcilement services, Positive Pay is a check fraud detection service that allows you to take control of your business’ payment processing. You can monitor checks processed for payment and match them against your account. This affords you the opportunity to reject unauthorized payments before incurring loss.

You must simply transmit a file of issued checks (an issue file) to your financial institution whenever your business writes checks. When checks are presented for payment at the bank, they are compared to your issue file by account number, check serial number, and dollar amount.

Any discrepancies are flagged as exception items and sent to you for review. Exception items can include paid-no-issue (a paid check doesn’t exist in the issue file), amount mismatch (the dollar amount of a paid check doesn’t match the issue file), duplicate paid (a paid check is a duplicate of a previously paid item), and paid void (a paid check matches a voided check in the issue file).

Typically, you receive an email alert prompting you to view an image of the item(s) and reply with a pay/no-pay decision. 

Types of Services

Payee Verification: Because altering the payee field has become an increasingly popular method of check fraud, payee verification, an advanced security feature, validates checks not only by account number, check serial number, and dollar amount, but also by payee name. Presented checks are compared to the payee field in the issued check file and exception items are sent to you for a pay/no-pay decision. 

Reverse Positive Pay: Reverse Positive Pay is an ideal alternative for business owners who don’t like to create issue files, which requires uploading or manually keying in check details, every time they write a check.

Instead, the financial institution transmits a file of the checks presented for payment to the company every day. You can check the file against your own records for discrepancies and then notify your financial institution of your payment decisions. 

While this service may save time, it does not prevent fraudulent checks from being cashed at the teller line since the bank does not have access to the issue file.      

The Benefits of Positive Pay

The benefits of Positive Pay include more than just check fraud detection. Positive Pay also:

• Automates check reconciliation
• Easily reconciles your business’s payroll
• Simplifies your accounts payable process
• Improves audit control
• Improves accuracy of deposit balancing
• Reduces disbursement risk
• Streamlines check storage and retrieval
• Saves your business time and money!  

Positive Pay and You

Check fraud is insidious; despite the decline of total check volume, fiscal loss from check fraud continues to climb. This crime poses one of the greatest challenges for businesses and financial institutions, its tendrils reaching countless organizations in nearly every industry. And it can have costly—and devastating—repercussions on its victims.

Positive Pay is one of the strongest defenses in your check fraud prevention arsenal. Meant to complement your internal security measures, it can significantly mitigate the effects of check fraud. Even that master forger, who outwitted some of the best minds in the financial industry and FBI, avidly supports it. “A highly secure check and Positive Pay,” Frank W. Abagnale Jr. said, “are the foundation of every successful check fraud prevention program.”

Ultimately, what makes Positive Pay so appealing is that it gives you back control—and peace of mind. To learn more about this invaluable business management tool, contact your financial institution’s Cash Management Department!