November 28, 2023

Benjamin Chu, President, elegant.

Bill Clinton once said“The price of doing the same old thing is much higher than the price of changing.”

It is not always easy to introduce and implement new technology in an organization, either due to employee opposition or a lack of infrastructure to integrate the rapidly changing technology. For example, with the introduction of Internet banking, many institutions are switching from checks to electronic payments in their B2B transactions.

However, for most organizations, checks are the preferred method of payment and, therefore, checks remain more vulnerable to payment fraud. according to Payment fraud and control survey Published in 2022 by the Association of Financial Professionals, checks were one of the payment methods most affected by fraud activity (66%) in 2021.

As a result of checks being a preferred method of payment, many companies end up being the target of check fraud by employees or third parties. Every organization needs to put safeguards in place and take advantage of modern technology in order not to become a victim of fraud from scammers. There are some lessons that can be learned from the following check fraud cases to protect your organization.

1. The saga of the billion-dollar check bird scheme brought about by the downfall of a company

The revelation of a massive paper-cheque scheme by the company’s CEO, Meyer Webisch, and his co-conspirators shook Synergy Brands Inc. It is a general food products company. Vibish and his co-conspirators overestimated the value of the company To defraud investors.

They deposited checks into bank accounts of associated food manufacturers and distributors in Canada. However, there were not enough funds to support these checks. The Canadian companies then sent checks of the corresponding amounts not backed by sufficient funds to the third-party companies controlled by Vibish.

As the deposited funds were immediately available for bank withdrawal, the scheme artificially inflated the company’s account balances. Vibish booked millions of dollars in accounts receivable and fictitious income based on these fraudulently inflated bank balances. They have gone so far as to make false statements before the US Securities and Exchange Commission.

A cleverly designed check-collection scheme eventually resulted in the company being delisted from the Nasdaq, and the company filing for bankruptcy. Before the banks revealed Vibish’s plan, Signature Bank lost nearly $ 26 millionInvestors lost thousands of dollars.

Fraud of this level involves many banks, different accounts, and billions of bad checks. Modern technology can help banks and organizations detect fraud by automating data capture and analysis efforts. Digital tools can provide data analysis summaries and data visualizations after check data has been converted to Excel format, making it easier to track money flow.

2. Vanguard employee investigates fraud scandal

Scott Caps, former employee of Vanguard Investment Management, He cleverly used his position to defraud the company and the state. The Capps had access to dormant accounts with abandoned money that should ideally go to the state.

Instead, he abused the trust the company had given him, stealing the passwords of his subordinates and using them to gain access to the system. He issued checks on these dormant accounts to a co-conspirator. Capps stole more than $2.1 million through a check fraud scheme devised by him and his co-conspirator. United States District Judge judged him to 48 months of confinement, three years of supervised release, compensation of $2,137,580, and forfeiture of $648,600.

It took two years to uncover the Capps scheme, which led to the theft and laundering of funds. This case is evidence of the fact that there is a need for the watch to ensure proper safeguards to avoid such scams, particularly in organizations such as investment management firms and companies involved in money services.

There are digital tools that can accurately convert handwritten checks and other financial documents into Excel. Once converted to Excel, these tools can also help your business detect erratic transactions and report suspicious activity early. Early detection of fraud can save your organization a ride.

3. Fraud sometimes happens from a trust site

Angelo Canaris worked as an accountant for a firm in Cleveland, Ohio. His role included issuing checks to company vendors and preparing sales tax returns. Kanaris forged checks on behalf of the company in the name of outside sellers. However, he was depositing checks into his bank account using the mobile deposit feature. Kanaris succeeded in concealing his deception for more than four years, during which He embezzled approximately $375,656 by taking advantage of his position as the company’s accountant.

If the company caught the scam right away, it would have saved the company four years and thousands of dollars. Having a reliable fraud detection software is nowadays mandatory in every organization.

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Check fraud has been a method of deceiving people since time immemorial. The most famous check fraudster is Frank William Abagnale Jr., whose story can be found in the book and movie Catch me if you can. He started presenting forged checks by impersonation at the age of fifteen. Unfortunately, technology did not make strides at that time.

However, today, digital tools can read and capture data, such as payee, payer, check number, date, amount, note, signature in image form and even magnetic ink character recognition (MICR) font. Moreover, these tools can convert data to Excel and create visualizations, providing a quick analytical summary.

Particularly in the cases of organizations involved in money services, regulations under the Bank Secrecy Act place additional responsibility for reporting suspicious activities to protect investors and public funds. Using technology to automatically report illegal transactions is a step forward in protecting your organization and its customers.

Your organization may have problems implementing the new technology. However, some tools can easily integrate with your existing business processes and be easy to use, giving your employees no reason to avoid change in the organization.

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