Despite the evolution of electronic banking and payment systems, check fraud remains a persistent and costly problem for business owners.
During a six-month period in 2023, FinCEN (Financial Crimes Enforcement Network, a division of the U.S. Treasury) received over 15,000 reports of mail theft-related check fraud totaling over $688 million1. Mitek, a global leader in fraud prevention, further reported that 31% of small businesses were hit by check fraud last year, and 65% of those businesses reported losses over $50,0002.
Checks stolen through mail theft are used in one of three ways:
- Fraudulently endorsed and deposited
- Used as templates to create and negotiate counterfeit checks
- Altered and deposited
To help reduce exposure to business check fraud, follow these best practices.
- Consider sending payments via an alternative method like ACH (automatic payment).
- Avoid placing envelopes with check payments in an unsecured mailbox or post office ‘blue box.’ Instead, deposit these envelopes in the mail receptacle inside the post office building or physically hand them to a postal clerk.
- Do not leave received mail in an unsecured mailbox for any duration of time. If possible, request your mail be hand-delivered to your office.
- Conduct a daily review of all checks that have cleared your business account using online banking, ensuring the checks cleared for the correct amount to the proper payee. Further, review the endorsement to ensure the intended payee received the funds.
- Consider implementing Positive Pay, First Mid’s business fraud protection service.
- Consult your commercial insurance agent to discuss coverage options that may be available to protect against fraud losses. Learn more about Business Insurance from First Mid Insurance Group here.
If your business recognizes an unauthorized check clearing your account, timing is everything when recovering those funds. Report the activity immediately to your local banker or call First Mid Fraud Support toll-free at 833-488-3723. We will make every effort to attempt to recover lost funds and work closely with you to reduce further losses.
For more information about fraud protection services offered by First Mid, consult your local banker or call Treasury Services at 833-680-5110.
Sources:
1 FinCEN Issues In-Depth Analysis of Check Fraud Related to Mail Theft | FinCEN.gov
2 New Report Reveals Growing Small Business Check Fraud Problem | Business Wire
Insurance products and services offered through First Mid Insurance Group are not deposits or obligations of the bank, are not insured by the FDIC or any governmental agency, are not guaranteed, and may lose value.
