March 16. 2011 | Mary Lou Gervie
Check Tampering Schemes
Dishonest employees often obtain checks, place false information on them, and divert them for personal gain. This can be done through forgery by signing the check on the face or forging an endorsement on the back of the check. A paycheck or a business check can be altered for a different amount or payee. There are concealed check schemes where the fraudster prepares the check and includes it in a stack of checks to be signed, typically during a very busy part of the day, and the signer fails to recognize the false check.
However, another scheme, prevalent in the Washington, DC, area and perpetrated by an organized ring of criminals, is where a signed check which has not cleared the bank is stolen by a bank or vendor employee. The check is taken to a copy machine business where it is duplicated, redacted for payee, check number and amount, and then reissued to a “mule” who cashes the check for a small fee. The primary target has been mid-to-large size construction companies, but it can happen to anyone.
Effective internal controls help catch these check tampering schemes early. Daily monitoring of cleared checks or using a “positive pay” service provided by your bank are two recommendations. Clearly, timely bank reconciliations are a must.
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