Not afraid of paper checks? You should be.

The economic downturn is exposing crooks that had managed to escape scrutiny until now. Belt-tightening has caused businesses to examine process and procedures, trying to find ways to cut costs, and they're finding phantom employees, receipt skimming, fake vendors - all bobbing to the surface like bodies in a horror movie lake.

Here's an interesting article by CPA Timothy Dayles about how to address risk in businesses. The article, which first appeared in "Smart Business Cleveland" in 2007, lists ways that businesses can assess risk.

Checks are vulnerable to fraud at every stage, from the box of blanks in your supply closet to your distributed payroll checks, all the way to the canceled checks you may still get back in the mail. Thieves can make new checks with your existing information, wash a payroll check and fill new amounts and payees on it, even sell your banking information. You can cut paycheck risk completely with a Directo paycard program.

Directo provides secure online enrollment, eliminates the need to reconcile, makes payroll corrections easier and does away with the risk of lost checks and fraud. It's FREE to the employer, and employees appreciate that Directo never checks credit, and that the robust paycard program lets them access their account information online or by telephone, gives them 24/7 access to their money via ATMs, retail point of sale, and electronic billpay, and all the benefits of direct deposit without ever having to step into a bank.

Give your company a big dose of security. Call 770.810.6502 - Jim McCarthy will answer your paycard questions, and your Directo paycard program can be online in just days.

No obligation. No cost. No risk. Today, those are sweet words indeed.

Positive Pay - Is it enough in these times? In the end, who gets hurt, really?

In these unprecedented times in banking, financial institutions now more than ever are reassessing relationships and in many instances, resetting the terms and lowering their risk with certain customers. In fact many financial institutions are demanding that certain customers change the way they do business.

Here's a scenario that the bank and company are trying to avoid; Outside a check casher, a fraudster waits for an innocent customer to arrive. The fraudster says, " Hey mister, there's a long line in there and you don't have all the time in the world. Let me cash this check for you. In fact, I won't charge you. I'll stay here and cash it with the rest of my checks." The innocent transaction takes place and the customer is on his way with cash in hand.

Meanwhile the fraudster takes the check, copies the check's microcoding with the company's bank and routing number. After a quick trip to the office supply store to purchase blank check stock, he then creates several other checks using the company's bank information. He hires a few people or in some cases, dozens of people to cash the fake checks all over town. He takes his 'profits' and hits another innocent person and company.

So who pays for this scam and the loss of thousands of dollars? If the checks clear through the banking system, the company typically ends up 'holding the bag' and absorbing the losses.

To curb this fradulant activity, banks offer a popular service called Positive Pay. From the Wikipedia definition of Cash Management "Positive pay is a service whereby the company electronically shares its check register of all written checks with the bank. The bank therefore will only pay checks listed in that register, with exactly the same specifications as listed in the register (amount, payee, serial number, etc.). This system dramatically reduces check fraud."

A bank's Cash Management Services organization is typically responsible for educating, selling and providing a Positive Pay solution to its customers. Once implemented many of the problems of check fraud disappear. But is the company totally out of the woods? What if this same fraudster hits again?

While it is true that fraudulent attempts may continue in some form, at least the bank and company are protected. With Positive Pay fraudulent checks are returned to the merchant. It's the grocer, check casher, liquor store or merchant that has decided to take the risk to cash the check. They then take the loss in this case. Somebody has to pay.

But there is more to the story, particularly for low income people. The 'unbanked' also takes the hit! Why? Because when the merchant cashes a fraudulent check from a company, the next man to attempt cashing a check may be turned away, or to make matters worse, paying an exorbitant amount just to get his hard earned paycheck cashed. Ultimately, who gets hurt, really?

And so while on the surface the company and bank have reduced their risk, what have they done to their workers, the individuals who are now paying more to get their checks cashed?

Companies must consider the ramifications of Positive Pay to the entire 'food chain' of payments. Some have looked to Directo paycards to help mitigate the risk and help their workers. Again, in the end, without a program like Directo, who gets hurt, really? Your workers, and you.

BH
http://www.directocard.com/

Payroll check fraud increases as economy worsens

On January 23rd a brazen thief was photographed leaving a Charlotte County, Florida, Wal-Mart after cashing a bogus payroll check. Here's the story from local radio station WINKnews.com:

CHARLOTTE COUNTY, Fla. - Charlotte County Sheriff's detectives are asking the public's help in identifying a suspect in a Wal-Mart surveillance photo in Murdock who cashed a $1,475 payroll check that turned out to be fraudulent. The incident happened Dec. 31, 2008 and the case remains unsolved.

Detectives said the suspect provided a payroll check made payable to a Timothy Lamar Trayhan of Palmetto, Florida, and he used a Charlotte, North Carolina, driver's license with photo to cash the check.

Detectives learned that the Wal-Mart on Cortez Rd. in Bradenton had also cashed six payroll checks from five different companies drawn on three different banks, and payable to six different people. All of the checks had the same routing and account numbers.

Those companies lost thousands of dollars, and may face even more losses if the criminals move to another town and cash more bad checks.

A quick way to cut payroll fraud risk is to implement a paycard program. Directo paycards make it easy to eliminate paper payroll checks, reducing fraud while streamlining payroll delivery.

Read more about payroll check fraud in an article Directo President and CEO Bob Howe wrote in Construction Magazine.