Using Positive Pay to Protect Yourself From Fraud

Positive Pay is a service offered by banks that is designed to reduce fraudulent check-cashing against your account. If you are writing checks on your bank account (as opposed to using ACH transactions), then the positive pay service, which usually has an extra charge, may be beneficial.

When you activate positive pay, you must send a file of checks that you have written to the bank. The bank will not cash those checks against your account unless they match by check number, dollar amount, and account number. Your file may also include the date of the check and sometimes the payee. Some banks are also able to match payee, but not all of them, so be sure to ask about this.

If there is a mismatch among checks presented for payment, the check will be treated as an exception item and your company will be notified. A representative of your company will let the bank know whether to pay or exclude the exception check.

Positive pay helps to deter a couple of types of fraud:

• Checks where someone has changed the amount
• Stolen blank check stock, even if you don’t know about it being stolen

Positive pay is not designed to prevent the type of fraud that occurs when checks are written to a ghost vendor and erroneously approved by management.

Ideally, you should separate the file creation process from the person who actually writes and/or signs the checks. This will give you better internal control.

The main challenge is making sure the bank receives the file of checks before they are presented for payment. This including any manual checks written. Another issue is the extra cost, although some banks offer this service at no extra charge.

If you are worried about check fraud, consider asking your bank about positive pay.


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