Stocking preprinted checks is risky, considering today's technology: Laser printers and color copiers offer a virtual fraud toolbox for scam artists. "Preprinted checks are like blank money orders," says Phil Rightler, president of MICR Tech, Brownstown, Ind. "Secure stock has to be kept under lock and key and every piece has to be accounted for."
The California State University (CSU), Long Beach, Calif., relies on positive pay software from MICR Tech, Brownstown, Ind., to reduce the risk of check fraud.
"If you, as a company, do not do the due diligence of securing your paper documents, then you will be held responsible."
Phil Rightler, President
MICR Tech, Brownstown, Ind.
One way is positive pay, a program that helps banks identify fraudulent checks. Firms using positive pay send electronic files to their banks, listing checks issued and their amounts. As checks are cleared through item-processing areas, banks match the checks and their amounts to the files. (In reverse positive pay, banks send electronic files detailing check information to clients, who compare the information with their internal records. The businesses then tell the banks which checks match their internal information, and the bank processes them.)
The California State University (CSU), Long Beach, Calif., implemented positive pay several years ago, when its controllers decided preprinted checks had great financial liability, Rightler says. CSU uses MICR Tech's positive pay software. "Positive pay gives them better control and tighter internal and external security, which is really what they want," he says. After a check run, the university prepares a formatted data file of the checks issued, including check numbers, amounts, dates and other bank account information. The data file is then transmitted to the bank for review. The file also can include stop payments, voided checks and manual checks, Rightler says.
The bank compares checks to information in data files, flagging suspicious checks and forwarding a list of "exception items," or questionable checks, to the issuer. This allows the university to authorize or reject check payment. "The university loves the idea of positive pay information on a check because once the bank identifies exception items, it presents these items to the controller at the university," Rightler says. "The bank asks, 'Do you want me to pay it?'" The university has reduced the financial risk of check fraud.
Besides the software, MICR Tech also provides toner cartridges, blank check stock, testing equipment, custom logos and signatures, and secure fonts and forms. "We secure signatures and logos and even have security fonts for checks, which are funky fonts that are difficult to alter or replicate," Rightler says.
Firms that don't show "ordinary care" in securing their documents can be held responsible for fraud losses, Rightler says. "If you don't have positive pay, banks can say that you are not securing your checks," he says.
--Kristen Hampshire
