How to Protect Your Business as Check and Mail Fraud Surges

The lifeblood of any commercial business is the constant flow of cash in and out of the organization. Whether it's receiving payments from customers, reimbursing suppliers or managing payroll, a steady stream of funds is essential for day-to-day operations.

As payment technology has exploded, one would assume commercial businesses are phasing out physical checks, in favor of more secure and timely options. Yet, surprisingly, the 2024 Payments Fraud and Control Survey from the Association of Financial Professionals (AFP®) found that three-quarters of respondents say their organizations still use checks, and 70% of these organizations have no immediate plans to discontinue their use.

Disconcerting Rise in Check Fraud

That can pose serious risks, considering that check fraud has increased 385% since the pandemic, according to the U.S. Department of the Treasury. Particularly vulnerable are payments sent through the United States Postal Service (USPS); in fact the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has reported an astonishing $688 million in mail-related check fraud.

The AFP survey bears that out: 80% of organizations reported having been targets of payments fraud activity in 2023, an increase from 65% in 2022. 65% of respondents said checks continue to be the most susceptible payment method. Distressingly, 30% of the respondents said they were unable to recover the funds lost to a successful fraud attempt.

That’s no surprise to Martha Henderson, Vice President and Fraud Monitoring Manager at Old National Bank. “The most common types of check and mail fraud we’re seeing include counterfeit checks, forged endorsements and altered checks, where they’ve been stolen, then washed,” a process where thieves use chemicals to remove the ink and rewrite the check to themselves.

Best Practices for Safeguarding Your Assets

How can you protect your company’s hard-earned money? Your first line of defense is education, says Henderson, who shares five habits to adopt.

1. Use other methods of payment.

If checks are still an integral role of your payments department, it’s time to consider switching to one of the many alternative payment options that may be safer. Henderson recommends ACH transactions and wire transactions for more secure—and speedier— payments. “We’re really trying to bring awareness to the fact that there are viable replacements to a big book of checks they're mailing to their vendors every month.”

2. Vigilantly watch your account.

Beyond submitting payments electronically, Henderson says her next top recommended fraud-busting maneuver is to monitor and balance accounts monthly. “We’ve had clients come back to us months later inquiring about check fraud because unfortunately they hadn't reconciled their accounts in a timely fashion,” she says. “It’s critical to be proactive by promptly reviewing statements to detect questionable activity.”

For example, she says that a commercial client might have issued check 1234 for $2,000, but then recognize that the amount that went through doesn’t match up or that the payee’s name was altered. “We can rectify the mistake when there’s a timely inquiry.”

3. Avoid public mail receptacles.

Many of us have nostalgia for those blue-standing mailboxes and trusty USPS mail trucks, but both are increasingly magnets for fraud. In the AFP survey, 20% of respondents reported fraud due to interference with the mail system, a full 10 percentage points higher than in 2022.

“Just as consumers are learning that the ‘red flag’ on their mailbox alerting their carrier to outgoing mail is literally a green flag for thieves, we also have to caution our commercial clients about unattended mail,” Henderson says. “If you must use a check, never leave mail where others can access it. There’s no substitute for going into the post office and ensuring a payment is sent securely.”  

4. Switch to digital statements.

On that note, if your organization still receives paper statements, talk to your bank about making the transition to electronic access. Not only is it more environmentally friendly, but accessing statements online means they can’t inadvertently fall into the wrong hands.

Of course, you’ll also need to deploy robust cybersecurity best practices to ensure the safety of your financial information. Start by using strong, unique passwords for your banking accounts and changing them regularly to minimize the risk of unauthorized access. Enable multi-factor authentication (MFA) for an added layer of protection and make sure your business is protected by a reliable firewall. Then be vigilant about potential threats, such as email phishing campaigns. Verify the source of unexpected emails and avoid opening attachments or clicking links from unknown or suspicious senders.

5. Validate incoming checks.

While accepting consumer checks is relatively rare, implementing education should be your top line of defense here, too. “Discuss best practices with your team so when they receive a check as payment, they review it for subtle signs of tampering.” That’s also where Old National Bank’s Check Positive Pay can help protect you. 

Old National Bank on Your Side

Fortunately, your business doesn’t have to go it alone, says Henderson, noting a number of ways Old National Bank works toward payment security for commercial clients.

Again, the priority is education. “As we build new relationships, we make our clients aware of ways to prevent fraud from the beginning, starting with the recommendation to make payments electronically rather than with checks.”

But despite the best intentions, fraud can happen, which is why the bank uses advanced machine learning to analyze transactions. “Our software reviews check stock and other features to help us identify potentially suspicious items,” Henderson says. “We have a team of analysts constantly reviewing alerts to be proactive in spotting anomalies, and then the associated commercial relationship manager will instantly contact their client.”

It’s a service that’s highly valued as check fraud proliferates. “We’ve gotten lots of positive feedback from commercial clients regarding outreach from their relationship manager,” Henderson said. In one case, a commercial client’s banker determined that a check presented for over $700,000 was counterfeit and immediately contacted them. “The check was returned that day, with no loss to the bank or the client, who quickly added our Check Positive Pay service to their account.”

Unfortunately, that situation is all too common; Henderson recounted another incident where a business client had two checks presented, totaling nearly $300,000.  A commercial banking specialist contacted the client and confirmed it was fraud. “Again, the checks were returned the same day with no loss to Old National Bank or the client,” Henderson said. “Our goal is always to protect our clients.”

That entails collaboration throughout the bank, with marketing and communication teams making educational fraud-prevention content a priority, whether focused on prevention tips or alerts to new types of scams.

Henderson urges companies to never hesitate to talk to their banker or treasury management consultant. “While we can’t always control incidents of check and mail fraud, we can focus on being proactive rather than reactive.”

Would you benefit from Old National Bank’s strategic approach to fraud management? Find out about our fraud prevention services or contact a commercial banker today.