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Bad Check Fraud


Businesses pay a heavy price for permitting customers to buy merchandise with checks. Total reported losses from bogus checks run into the billions each year in California alone. Small businesses are easy prey to this type of fraud. According to one estimate, small businesses loose approximately 35 times greater from bad checks than large businesses do. A bad check is one that is returned to you with non-sufficient funds in the account to cover it. A bad check may also be a stolen, forged or fictitiously printed check.

Taking Preventive Measures

Establish in-house check cashing policies.

Amount of check. Limit the amount for which a check may be written or limit it to the amount of purchase; require management approval for any check written in excess of a set dollar amount.

Two party checks. Decide whether or not you will accept them. These checks have a higher incidence of unreliability and can be more difficult to collect.

Local versus out-of-state checks. Local check writers are easier to contact for collection.

Identification. Always ask for proper identification. Legitimate forms of signed identification include permanent and valid driver's licenses, national credit cards and military or government identifications. Many retailers ask for two pieces of identification, at least one of which includes a photograph of the owner.

Returned check fee. Decide what you will charge. Have the charge clearly posted for customers to see.

When you accept the check. Make sure you have a name, address, phone number, California driver's license or identification number.

Instituting Controls and Mechanical Deterrents

Check verification service. Retailers may have access to centralized computer information on bad check passers and stolen checks through verification services.

Photographic equipment. This method takes a picture of the check as well as the customer. This method can be very expensive.

Fraud Prevention Tips

Ask for photo identification (ID).

Look at the photo and signature to see if they match.

While holding the photo ID, feel the photo with your index finger and thumb. See if you can feel a straight indention where the photo has been inserted. It should feel smooth

Do not be in a hurry. Criminals will wait until you are busy with a long line of customers because they know you may be in a rush to process transactions.

Trust your instincts. Take the time to check out the transaction carefully if you have a strange feeling about someone.

Take the time to call the bank and verify if you are not comfortable with the transaction. Call 800 numbers to confirm accounts.

Watch the suspects. Be suspicious if they are looking down or away from you, are looking out to the parking lot, or have a cap covering their eyes.

Start using the Touchprint program if you are not already using it. Have all customers - even those you know - place their right thumbprint on the front of the check between the memo and signature line. For more information on the Touchprint program, contact the Business Watch office at 661/267-5153.

Spotting Bad Checks - What To Look For

Many fraudulent checks are visibly phony. By paying close attention to a check's appearance, you can often detect a possible bad check before accepting it as payment. You may be looking at a phony check when you see one or more of the following telltale signs. Protect yourself against possible losses by requiring management approval of the check or asking for an alternative form of payment.

Consider it a red flag if the driver's license number is already hand written on the check by the customer. Over 90 percent of these are stolen checks.

Dirty checks are almost always forgeries. The criminals use the smudges or dirt to hide the alterations made on the checks.

Look for ink smears or altered writing; writing over letters or numbers; and/or erase marks. These are telltale signs of forgery.

For more information on bad checks, contact the Business Watch office at 661/267-5153.

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