The ability to prevent fraud is crucial in
a competitive marketplace. Check
fraud, in particular, can have a major impact on a company’s bottom line.
Certainly, the use of ACH (Automated
Clearing House) transactions to transfer
and process electronic funds is on the rise.
According to the Electronic Payments
Association, 16 billion payments were
made in 2006 through the nationwide ACH
network, an increase of approximately 14.5
percent over 2005.
Safeguarding against check fraud — both
traditional and electronic — requires diligence and determination, but new technologies are making the process simpler
and more cost-effective.
“Financial institutions offer tools that
allow customers to protect their assets for
a relatively low cost,” says Lynnell Harris,
senior vice president of Comerica Bank.
“It’s very much a win-win situation.”
Smart Business spoke with Harris about
methods that can be used to help prevent
check fraud, the benefits of Positive Pay
and what distinguishes ACH Positive Pay
from other fraud-protection products.
What types of companies are most susceptible to check fraud?
All types of companies. In today’s environment, anyone who sends out checks or
transacts business with partners or consumers is subject to fraud and should take
precautions. Companies across America,
regardless of their size, are at risk.
What are some methods that companies can
utilize to help prevent fraud?
There are a variety of safety measures
and financial tools. For example, employees can help protect sensitive information
by making sure items such as checks,
account numbers, bank statements and
other sensitive financial information are
locked up and stored away. A system of
checks and balances can be employed
within the company to ensure appropriate
access and approval authority.
In today’s environment, electronic transfers offer more control, as systems enable companies to set up various layers of
authority based on dollar amounts or transaction types. Other tools include online
account review and Positive Pay.
How does Positive Pay work?
Essentially, the bank delivers information
to the customer regarding checks or ACH
transactions that will be posted against his
or her account. The customer then has the
opportunity to review the information and
determine if they are valid items. The customer authorizes the posting of the transactions and notes any unauthorized transactions. When notification is returned to
the bank prior to the deadline, unauthorized transactions are returned to the
depositing/originating financial institution.
Tools such as Positive Pay significantly
mitigate risk for the company without
requiring a huge investment in technology.
How can a business utilize ACH Positive Pay
to accept or reject ACH transactions before
they are posted?
In a manner similar to checks, the bank
will present to the customer, before posting, all ACH transactions. The customer
then has the opportunity to identify any
unauthorized ACH activity. The customer
authorizes the posting of the transactions
and notes any unauthorized items prior to
the notification deadline. The bank will
return those items before posting to the
customer account.
What distinguishes the ACH Positive Pay
service from other fraud protection products?
Solutions that enable a business to protect and control electronic activity on its
accounts isn’t commonplace. Debit blocking provides one level of protection, but
doesn’t offer the full range of decisions that
true ACH Positive Pay solutions do. By
reviewing and making decisions on all
ACH activity before it posts to the account,
ACH Positive Pay offers a greater degree of
control and information management.
If a business detects suspect items using
either Positive Pay or ACH Positive Pay, what
course of action can it take?
For ACH Positive Pay, simply make a
decision on your items online by the deadline. You can also contact your bank to
place stop payments on any item you’ve
rejected as a second level of prevention.
For check positive pay, contact your financial institution. Typically, the information
regarding suspect items is available first
thing in the morning. Customers pull information electronically, review it and authorize payment of the valid items. If there is an
unauthorized item, they would notify their
bank in that response. The bank would
then return those unauthorized transactions before they post to the customer’s
account.
LYNNELL HARRIS is senior vice president of Comerica Bank.
Reach her at (734) 632-4989 or [email protected].