Cheques are often used as the mode of payment for various business and personal financial transactions. However, cheque fraud is an alarming concern, estimated to cost Australian businesses somewhere between $800 million and $1 billion (2007).

Cheque fraud also goes unreported at times because businesses don't want to come across as having little control over finances. This may lead to customers losing faith in company procedures and ultimately taking their business elsewhere. Cheque fraud occurs when a cheque is presented to a bank and is either counterfeit completely or forged with copied signatures. Sometimes cheque fraud occurs when amounts or account names are changed. Figures, names of payee, signatures can all be easily faked. So with all this knowledge of fraudulent procedures how do so many people still fall victim?

• How does it Occur
• Simple ways to look out for fradulent cheques in payments you make and recieve
• Simple practices to avoid being scammed

How does it occur?

The 2002 Dreamworks Studio film, 'Catch me if you Can', captures the life of a young fraudster, who by the age of 22 had forged cheques well over $2.5 million. Frank Abagnale spent years in jail and went on to advise government agencies on how fraudsters work. He explains that all a fraudster needs is to source a logo from the internet, obtain the chief financial advisor's name and signature from an annual report and gather banking details (including information on the company's bank) to create a counterfeit cheque.

The offender can phone a company in the pretext of making a payment to obtain crucial banking information. With today's technology, forged cheques sometimes look more convincing than original ones. Once the cheque is presented to a bank, based on approval the money is transferred and possibly lost forever.

Here are some simple ways to look out for fraudulent cheques in payments you make and receive.

Current and accurate information: Inform accounts payable regarding possible cheque fraud. Managers/business owners should try to ensure information on the cheque is current and accurate. This includes matching signatures to those on record as well as looking for misspelt words and acronyms. If there is any doubt, account managers must be called to identify the legitimacy of the payment and customer.

Avoid interstate cheques: Provide interstate and overseas customers other payment options such as bank drafts which will ensure that you are paid. However, if a customer does present an interstate cheque, ensure you have their home address and not just a post office box number. Post-dated cheques may leave you in lurch of your money as the account maybe closed before the cheque date.

Develop vigilant staff: Ensure that employees handling payments are trained to look at cheques and assess their authenticity. Sometimes forged cheque paper is not as thick as a normal cheque, or there maybe a misspelling or misprint which can be easily traced.

Watch out for mail fraud: Businesses should try to avoid mailing out cheques to suppliers and vendors as this may lead to mail fraud which occurs when a cheque is stolen from the mailbox, forged and represented under a false name. The fraud only comes to light when a vendor identifies a pending account, calling the business owned only to be informed that payment has been made and the money credited months ago. As a practice offer your customers/vendors the option of pick-up service for cheques.

No obligations: Most businesses offer various modes of payments, if for some reason a customer insists on paying via cheque, wait till the payment is cleared to deliver the goods. Business owners have no obligation to accept cheque for any payments, feel free to investigate further by carrying out a credit check.

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Here are some simple practices to avoid being scammed

Writing cheques: ensure you leave no gap between payee name, the numeric amounts as well as amount in words. Avoid using acronyms in cheques, spell out the term.

Balancing the books: Ensuring that accounts are reconciled at the end of each month leaves no overdue payments and reduces the chances of an out of turn payment. Business should also look at creating a separate account for high value transactions to monitor them better.

Storage of cheques: ensure that blank cheques are not signed and that any spoiled cheques are destroyed. Set up a system where high value cheques need two signatures, making them more difficult to forge. The business chequebook must be kept in a locked cabinet to avoid theft of blank sheets. If possible avoid making high volume transactions via cheque.

Employee Policies: Sometimes fraud occurs from within the business, owners should enforce annual leave and other policies to ensure staff rotation and identification of possible fraud. Especially in the finance or accounts department, employers must utilise strict employment policies, carrying out police checks even, to ensure trustworthy people are handling the money.

Prompt action: If your cheque book is stolen or even lost, ensure you contact your financial agency to 'Stop Payment'.

The process of protection is a matter of maintaining the appropriate diligence. Follow these steps to ensure that your business doesn't suffer from fraud!