Criminals can rob you of substantial amounts of money by altering or forging checks that your business issues.

By Dick Baumer

Ask most small business owners about fraud, and they usually think about accepting bad checks or stolen credit cards from customers. Few consider their own payroll or checks to vendors as a source of fraud.

In 1986, company insiders committed 72% of FBI check fraud cases. Today, 65% of corporate check fraud involves outsiders who use electronic image-processing equipment to produce forged checks, duplicate checks, or checks with altered dollar amounts. And the Comptroller of the Currency says corporate check fraud will continue to grow at 12% to 15% per year.

While there are no foolproof solutions to counteract check fraud, you can safeguard the checks you produce. An automated check printing system can help. One of these systems, PAYstation® by Paymaster Technologies, based in Elk Grove Village, Ill., controls check printing and signing through five security levels of passwords, PIN numbers and keys. The exclusive font image of the system discourages outside alteration and fraud. And, an integrated system of software and hardware lets you print checks directly from your existing accounting application to your printer.

Typical Cases • The FBI arrested a Merrillville, Ind., family for forging more than $1 million in checks against northwest Indiana and Chicago businesses. • In April 1998, Cincinnati, Ohio, police asked FBI officials for help to stop an organized check-cashing ring that netted about $400,000. • During the past three years, the King County, Wash., Sheriff's Department of Fraud & Computer Forensics Unit arrested 218 suspects, filed 2,678 criminal charges and served 186 search warrants. Detectives were able to recover or recommend restitution of over $7.6 million obtained by suspects though fraud schemes.

There's no need to change any of your procedures. As a "printer-based" system—costing $730 to $1,768 depending on configurations—it works with virtually any accounting software (even custom software) from any host without an intermediate software interface. It is especially appealing to companies that write many checks because the system prints, protects and signs checks all in one operation.

Carol Kraft, head of administration for Marketplace Foods, a grocery store in Rice Lake, Wis., uses PAYstation® to write about 300 checks a week for accounts payable and payroll for the four-store, 475-employee firm.

"When we upgraded to a Windows-based payroll system we looked for a system to move us off tractor-fed checks to laser-printed ones that were more secure," Kraft says.

Although the PAYstation® software resides on all four of the administration office PCs, only one is used to print signed checks. Nevertheless, this method and Paymaster's $100,000 guarantee gives Kraft peace of mind about the security built into her check printing procedures.

Katie Miller, assistant controller of a Coachella Valley, Calif., country club also upgraded from the old tractor check system. The club's internal controls required an original signature for any check over $2,000 and two signatures on certain other checks. PAYstation's check printing and signing system allows users to designate none, one or multiple signatures during the same print run.

The need to protect your business checks is becoming more important. Experts warn that check fraud is a relatively low-risk crime with potentially high stakes and good odds of success. The Wall Street Journal reported that the amount of counterfeit checks written against corporate accounts totals an estimated $1 billion annually. Substantial portions of those fraudulent checks are for large dollar amounts.

In 1988 changes in bank regulations made it easier for criminals to successfully cash in on fraudulent checks. Regulation CC requires banks to make funds available within two days for local checks and within five days for out-of-town checks. Because of Regulation CC and competitive pressures to accelerate availability, banks are increasingly making funds available for checks before those checks have actually cleared.

Low-cost, professional-quality electronic publishing and copying technology also is responsible for the rise in check forgery. Color copiers, scanners, desktop publishing software and laser printers make it easy to alter, forge and duplicate corporate checks.

Just because you have never had a problem doesn't mean your business isn't vulnerable. Organized and sophisticated bands of crooks obtain corporate checks, produce excellent altered copies in volume and de-posit the checks before businesses even know they are victims.