Catch Me If You Can-Style Check Fraud Continues to Plague Small Businesses
In the hit 2002 film Catch Me If You Can, Leonardo DiCaprio brought to the big screen the notorious real life story of Frank Abagnale, Jr., a youthful con artist who, all before his 19th birthday, successfully scammed millions of dollars worth of checks through meticulous forgeries and elaborate impersonations.
Although most would place Catch Me If You Can in the film genre of real-life drama, for small business owners, the story of Frank Abagnale is the stuff horror movies are made of. And that's easy to understand, given that most security analysts contend that small businesses are most vulnerable to fraud in all its forms.
Small Businesses Are Biggest Bulls-Eyes for Fraudsters
Incredibly, 1 out of 4 businesses have experienced some degree of fraud, with 45 percent of all documented incidents related to check fraud. The average loss to a small business in these cases is about $50,000. In fact 30 percent of all fraud cases committed in the workplace occurred in businesses with fewer than 100 employees, with a median loss of $150,000.
Illustrating in great detail how truth is ultimately stranger than fiction, today there is arguably no one who serves as a greater champion for check fraud prevention than Frank Abagnale, who, after being sentenced to twelve years in prison, founded Abagnale & Associates, which advises businesses on fraud. Remarkably, Abagnale also works for the FBI, teaching at the FBI Academy and lecturing for FBI field offices throughout the U.S.
"Check fraud is a huge, growing problem," Abagnale told Intuit. "It's gone from $12.6 billion to now more than $20 billion in just ten years."
"75 percent of all payments made to another company are made in the form of a check," he says, "so as long as there's an opportunity to forge, alter, and counterfeit checks, there are going to be people willing to take that opportunity with very little risk."
According to Abagnale, it's imperative for small business owners in particular to take any and all precautions to safeguard their accounting and check-writing processes.
Check Your Check-Fraud Prevention Measures
"If I owned a small business and someone forged my check tomorrow for $50,000 and the bank says I'm not going to make good on this check, I'm done. I'm bankrupt. I'm out of business. So I always say the small business person has a lot more to risk than a major corporation," Abagnale offers. "It's been my experience that the bank is not going to pay on a loss unless you can prove the bank was negligent in handling that check. If the bank can prove that you were negligent in handling that check, you're going to be left with that liability. So it is a smart business person who tries to make sure that everything they do with their check -- using a secure check, the way they issue the check, the type of program they use -- is everything they need to do to remove any possibility of liability being shifted back to them."
So what are some practical tips for reducing your risk and vulnerability to check fraud? Here are some expert suggestions from Abagnale:
- Have good office business practices to lessen the chances for fraud -- and to ensure your bank supports any claims in the event your experience fraud.
- Issue multiple passwords to those responsible for check printing.
- Examine new checks when they arrive and keep check boxes sealed until needed.
- Destroy unused checks from closed accounts immediately and thoroughly.
- Avoid having multiple colors and sizes of checks in the same account–they make spotting counterfeit checks much more difficult.
- When typing checks, use a type font of 12 points or larger. Forgers can erase smaller type and replace it with larger type.
- Get checks with built-in security technology -- don’t assume all checks are the same!
- Ensure protective measures are in place from the time you order your checks through delivery, such as non-obvious and tamper-resistant packaging and signature-required shipping options.
- Read your bank contracts to understand your liability for check fraud losses. Banks may require certain business practices to support a claim against fraud.
- Use Positive Pay or Reverse Positive Pay to verify checks and make pay/no pay decisions to help protect against fraud.
- Make certain you have the right experts to provide advice and tips to protect your business from check fraud.
Here's Abagnale in his own words...
Michael Essany is a business writer for Intuit and is passionate about solving small business problems.