Commercial Check Fraud and How to Help Protect Your Business

What is Key Talks Fraud℠?

Join KeyBank experts and guests as we discuss the latest fraud threats and cybersecurity trends. We’ll cover rising scams and fraud tactics in detail. We’ll also provide steps you can take to help protect your accounts and personal information so you can avoid becoming victim.

[00:00:04] Kolt: Hello. Welcome to the Key Talks Fraud podcast. In each episode, we bring on experts to discuss fraud trends and emerging threats to help you stay aware of the risks facing businesses today and the steps you can take to help protect your financial accounts. We’re glad you joined us. Let’s get started.

[00:00:20] Kolt: Hello, everybody. My name is Kolt. I’m the head of enterprise fraud services here at KeyBank. On this podcast, we focus on real-world fraud risks and what businesses can do practically and operationally to reduce exposure. Today we’re talking about check fraud. And while checks may seem like a legacy payment method, they still remain one of the most targeted channels for fraud impacting business accounts today.

[00:00:39] Kolt: I’m joined by Stacie. Stacie leads our fraud solutions team here at Key and works closely with businesses and clients on fraud prevention strategies and controls. Stacie, thanks for joining us.

[00:00:49] Stacie: Yeah, sure thing. Thanks, Kolt — thanks for having me. I will say that check fraud is very much a business problem, and the risk profile has changed significantly over the past few years.

[00:01:02] Kolt: So let’s start with the basics, Stacie. What is check fraud in a business context?

[00:01:07] Stacie: Well, check fraud is when criminals are stealing legitimate information off of checks and creating fake checks or just plain stealing checks right out of the mail system, and using those checks to obtain access to money that is not theirs.

[00:01:31] Kolt: All right. Say for example, I’m a business client, I’ve heard about check fraud and checks getting stolen. I’ve actually changed my operational processes so we no longer put outgoing mail in our outbox — we take it to the blue collection box and drop it in the secured blue box. Am I OK doing that?

[00:01:48] Stacie: No, not anymore, Kolt. You’re not safe even if you’re walking up to one of those standalone blue postal boxes on a street corner. You’re not even safe if you’re going into a U.S. Postal Service branch and dropping it in one of the boxes there, either.

[00:02:09] Kolt: Explain that to me. If I hand-deliver the check to the post office and I know it’s gotten into the postal system — why would I need to be concerned about it after that point?

[00:02:18] Stacie: Unfortunately, criminals have found several ways to intercept the mail. They’ve used stolen arrow keys to steal mail directly from the boxes. They’ve actually stolen checks from the back of mail carrier trucks. They’ve been able to have individuals commit theft as part of their role working within the postal service. Because of just how easy it has become to access these paper checks, criminals have a very easy time getting their hands on your checks.

[00:02:55] Kolt: OK. So once they have my check, what kind of information should I be concerned about that’s now potentially in a criminal’s hands?

[00:03:02] Stacie: They’ve got the name of your business, they’ve got your business account number, and they’ve got the routing number for the bank — so they know exactly where you bank. But they’ve also got the signatures on the check. Whoever signed those checks, their signatures are now compromised as well.

[00:03:18] Kolt: So writing a check isn’t just sending a payment anymore — it’s actually exposing my account credentials.

[00:03:24] Stacie: 100%. And I think the first thing businesses need to do is reduce check usage as much as possible — and if possible, stop writing checks entirely. Really turn to electronic payments and digital payments such as ACH and wire transfers. That’s probably the best advice I can give. But if you are going to write checks, the key is having a layered approach with the right controls in place.

[00:03:57] Kolt: So if I’m going to write checks — and there are some use cases where I just can’t get away from it; I’ve been writing checks for 30 years in my business and some payments are only accepted that way — what products are available to me as a business owner?

[00:04:14] Stacie: The best thing a business can do is enroll in services such as Positive Pay or Check Block1. Those are really two of the best methods available. If you’re going to write checks, these are the best ways to protect your company from check fraud.

[00:04:35] Kolt: Explain Positive Pay to me. I’m not sure exactly what that is.

[00:04:38] Stacie: Sure. Positive Pay is a way for you to reconcile the checks you’ve written against the checks that are clearing your account. You submit a file — essentially a list of all the checks you’ve issued in the past 24 hours — and as those checks come in to clear, they’re matched against that file. If anything doesn’t match, it’s flagged for your review before it posts.

[00:05:00] Kolt: OK, so Positive Pay has been around for a while. There’s also an enhanced version that takes it to the next level. What is that?

[00:05:09] Stacie: That’s payee name validation. In addition to matching the check number and dollar amount, it also validates the payee name on the check against what you submitted in your file. So if you wrote a check to Kolt for $1,000 with check number 123, the system verifies that all three of those elements match when the check comes back to clear. If they don’t all match, it gets flagged for your review. This is important because checks are being altered — probably every second of every day — by criminals. You want to make sure that payee name is exactly who you wrote the check to.

[00:05:47] Kolt: That’s really good advice. OK, so as a business owner — you’ve convinced me. I’m going to stop writing checks and move to digital payment methods. If I make that switch, is there something I should do to my account?

[00:05:59] Stacie: Yes — you can apply a feature called Check Block. Check Block allows you to put a hard stop on your account so that no checks will clear against it. If a fraudster gets hold of your account number and tries to create a counterfeit check, it will be declined before it even hits your account. It’s simply blocked.

[00:06:26] Kolt: And as long as we’re on that subject — if you have operating accounts that aren’t being used for ACH deductions or check payments, you can also apply an ACH block to make sure no money is going out that way either. I know we’re focused on check fraud, but that’s a good tidbit to keep in mind. From a protection standpoint, the highest level of defense we’ve discussed is that payee name validation — it’s an important distinction. And one more thing: whenever checks do post to your account, don’t just reconcile the numbers. Actually pull up the image and review it. Make sure nothing has been altered, nothing looks different, everything looks exactly as it should. That’s truly good hygiene — just taking a quick look at those images as checks come through.

[00:07:14] Kolt: All right, Stacie — if a business believes it’s been impacted by check fraud, what should they do?

[00:07:20] Stacie: Act immediately. Call the 1-800 number for your bank, reach out to your relationship manager, walk into the branch — contact your bank right away. Some online banking platforms also allow fraud claims to be submitted online. The point is: reach out to your bank as quickly as possible and get a claim started so that the recovery process can begin as soon as possible.

[00:07:53] Kolt: And keep in mind there is a very short window to return checks under regulation — so it’s critical to act fast. If you’re a KeyBank client, you can always contact our Fraud Client Service Center, as Stacie mentioned, at 1-800-433-0124. If you use a TTY or TRS device, dial 711. Stacie, any final thoughts as we get ready to wrap up?

[00:08:17] Stacie: Yes. Check fraud is definitely not a new thing, but the tools that fraudsters have at their disposal have exponentially improved, making it incredibly easy to create a counterfeit check or to manipulate a check you’ve written and change the payee name or the dollar amount, for instance. As criminals continue to evolve, it’s critically important that businesses layer in the right fraud controls and take the right steps to protect their accounts.

[00:08:55] Kolt: Well said. Checks are a very legacy payment method, and there’s been a lot of modernization in this space. More secure, more modern payment options are available to businesses and business owners, so think about that as you move forward in your business. And if you could do us a favor: we know you know other business owners — you’ve got suppliers, vendors, and clients. Share this information. The best thing we can do is get this knowledge out there, and the more people share it, the more we can help protect businesses from fraud.

[00:09:27] Kolt: Whether you’re a KeyBank client or not, you can always visit us at key.com/businessfraud for practical guidance, tools, and resources designed specifically for business clients.

[00:09:37] Kolt: Thank you for joining us today. As a reminder, this content is for informational purposes only. It is not financial, legal, or investment advice. For guidance specific to your situation, please consult a qualified professional. We look forward to you joining us for our next Key Talks Fraud podcast.

1Subject to terms and conditions of service agreement, applicable fees may apply. Products offered, if used consistently and accurately, can help to identify instances of fraud or unauthorized activity. There is no guarantee that they will identify or eliminate all unwanted transactions or activity. Refer to the specific product agreements for more details.