Cheque fraud is one of the biggest challenges that are faced by financial institutions. It is among the fastest growing crimes in the financial world. It is being forecasted that cheque fraud will continue to grow by approximately 25% annually and will cause businesses in North America to lose more than $20 billion annually. The most common types of cheque fraud include counterfeiting, forgery and alteration of cheques.
With the constant advancement in technology, criminals have devised new ways to deceive their victims. These include counterfeiting of cheques as well as chemical alteration. Cheques are often duplicated through the use of computer software and high-grade laser printers as well as sophisticated photocopiers. Criminals also use chemicals such as bleach, brake fluid or acetone to modify cheques. Another form of cheque fraud is through paperhanging. This is done by writing cheques on closed accounts or by reordering cheques on these closed accounts. Cheque Kiting refers to the fraudulent act of opening two or more accounts and misusing the float time to create balances that don’t actually exist. This is also referred to as cheque washing.
The most common victims of cheque fraud are financial institutions and consumers. There are several ways criminals can get access to your cheques. They can either steal it from your home or your car; they can pick up a canceled cheque or an old cheque that you may have discarded; or they can remove a cheque that you may have mailed to pay a bill.
While criminals use technology for cheque fraud, the same technology can be used to prevent this fraud. For example, the use of Magnetic Ink Character Recognition (MICR) ensures that the sorter is unable to read a cheque that is counterfeit. Encryption is another technology that can help prevent cheque fraud. Cheques are printed with a code that is not visible to the naked eye but can be used to verify the validity of a cheque when it’s scanned or copied. The use of pantographs is also a useful strategy to prevent fraud.
Consumers can protect themselves from cheque fraud by taking certain precautionary measures. Cheques should always be kept in a secure location. Cheque books should not be left in cars or briefcases. Any unused cheques from closed accounts should be destroyed immediately. If cheques are to be reordered, they should be ordered in a continuous set of serial numbers. One set of cheques should be ordered per account. If for some reason there is a transaction on your account that you are not aware of, it is best to report it immediately.
It is also a good idea to endorse your cheques by your financial institution. Do not give your account number to anyone, unless and until you know for sure why the information is being requested and by whom. It is also advisable to reconcile your bank statements on a regular basis. When writing crossed cheques, mark them as not transferable. If there is a risk of fraud in certain situations, use cash, card or online banking. Avoid using cash cheques. Never ever sign blank cheques. Avoid posting cheques.
Consumers should opt for cheques that offer security features. Today, many companies offer cheques that employ security features to prevent cheque fraud. These companies use tightly controlled cheque printing procedures. The use of magnetic toners has also prevented criminals from printing cheques at home since this method is more expensive and difficult. Financial institutions also ensure that no unauthorized cheques are cleared unless and until the bank has been notified.
ChequesPlus.com provides its customers with cheques that feature multiple security features in order to minimize the risk of fraud and misuse. They provide cheques for both Canadian and US accounts and all cheques provided by Cheques Plus include security features such as Microprint and pantographs to prevent fraud.
There is no doubt that dealing with cheque fraud is a challenge for both consumers and financial institutions. However, employing certain precautionary measures and using cheques that have built-in security measures can help minimize the risk of such fraud. The second part of this article will talk about how you can prevent receiving fraudulent cheques and the measures that you can use to ensure you do not become a victim of such fraudulent activities.