Payroll check fraud came calling four days before Christmas. A branch of our main bank called and wanted to verify a check. The young lady who took the call in our office quickly realized that the check was out of sequence and for a person not on the client's payroll. The check was cut on our trust account. I spoke to the bank employee who had called us. They were stalling the person by having then fill out an account application, more about that later. I took the location of the bank and called the local police department. Of course I did not have the right exact city and had to make an additional call. The police finally were dispatched to the grocery store where the branch bank was. The woman trying to cash the check was gone. But the police were fairly sure that they would appreciate her soon. Next day she tried to pass a check on someone else at a different bank. The police were called and she was arrested and turned over on a filed warrant to the police I had called. They had issued a warrant for the same day she cashed a check on us and had given the bank as part of the paperwork a copy of her real drivers license. No one ever claimed crooks were smart.
She had cashed eight checks on our account for about eight thousand dollars total. Checks under a thousand dollars are easier to cash.
We have a very sophisticated check with all kinds of safeguards against fraud. Special paper, void pantographs, MICR lock, warning legends, artificial watermarks, colored paper and more. So what happened. The scammer and her cohorts simply copied the information including the MICR information on new check stock. They actually did not need a real check; they could have used a copy. They however changed the identifying information for the particular employee the original check was issued to. We currently have not been able to identify that person but we probably will in the end. The scam artist would not have changed the information if they were not interested in protecting the person whose check was originally. There was no way to make the information on the check not available to the scammer. The employee, the employee's bank and our bank need all that information. So what do we do in the future to prevent this? Positive Pay.
Positive Pay is where we now report every issued check to the bank. They keep a list of the check number, date issued, amount and Payee. Also whether that check has ever been presented before. Any check being cashed at a branch is verified against that list before being allowed to clear. Every check being presented to the bank is verified against that list before being accepted for clearing. This should stop checks like this from being cleared in the future. It will not stop scammers from creating them. There is easy availability of check stock and MICR ink and printers. This may seem like a slam duck to scammers but we are not worrying as much now with Positive Pay in place.
How do you stop this completely? 100% Paperless Payroll! If you are not issuing checks there is nothing for a scammer to create or cash. I have not seen where a scammer has been able to get into the Federal Reserve and NACHA to be able to create fraudulent ACH deposits to their accounts. Even then they would be a lot easier to trace and track down. The scammer would have to be bank customer and have been verified by the bank when they set up an account. For employees without bank accounts Payroll Debit Cards work just fine.
We of course have every intention of assisting the local DA in the prosecution of this person and her cohorts in crime.