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Minimizing Fraud Risk

Increasingly sophisticated techniques used by fraudsters are keeping payment risk management at the top of the priority list for treasurers, cash management professionals and banks alike. The most common types of fraud involve the physical altering and/or the counterfeiting of cheques. With strong internal controls and electronic payment solutions, companies can further reduce their risk of payments fraud. Recognizing that companies today need a comprehensive set of solutions to mitigate risk, we recommend a multi-pronged approach.

Cheque Fraud Prevention
Migration to Electronic Payments
Internal Controls
Fraud Prevention Tips and Takeaways

Cheque Fraud Prevention:

Positive Pay
With Positive Pay, we match the MICR line of cheques presented for payment against your company’s cheque issue file and notify you of irregularities that require a pay/no pay decision.

Enhanced Positive Pay
Our Enhanced Positive Pay service provides increased protection from fraud by verifying the name and address fields on presented items. Exception items are flagged, and a notification is sent to you by email asking you to investigate and return your pay/no pay decisions for each item via a web interface.

Reverse Positive Pay
Our reverse positive pay service is an alternative solution that allows you to match a bank cheque presentment file against your cheque issue file and inform us of any items you want returned.

Our cheque validation service allows you to easily make pay/no pay decisions via our Online Banking for Business platform. This gives you added control and helps to reduce the risk of cheque fraud. This service simplifies the handling of exception items by providing you with a single web interface for the consolidation and presentation of all your exception items. You receive one email notification for all exception types and are then able to view the MICR details of each exception item, as well as the front and back images of each cheque.

Migration to Electronic Payments:

To reduce the risk of cheque fraud, we advise wherever possible that you migrate to electronic payment solutions. By eliminating the use of paper items in the value chain with electronic funds transfers (EFT), wire payments, or electronic data interchange (EDI) transactions you reduce the potential for lost, altered or stolen cheques. With our Online Banking for Business platform, you benefit from many of the front-end best practices around payment initiation, such as access, session and user management, as well as multifactor authentication and detailed audit reports, thereby enhancing your fraud protection efforts. If your company does issue cheques, Online Banking for Business gives you the ability to inquire on the status of your cheques, view paid, outstanding and exception items, retrieve cheque images and make pay/no pay decisions in real-time via the web.

Move to a paperless environment by outsourcing your payables to us. Send us a single payment file, and we will create your Canadian and U.S. dollar payments using cheques, EFT, EDI or wire transfers. We print cheques and associated statements on high-speed MICR printers, using high-quality cheque stock with a combination of security features that include void pantographs, microprint borders and a watermark on the reverse. You can enjoy all of the benefits of electronic payments, without the overhead investment.

Internal Controls:

Since payments fraud can be perpetrated from within your organization, establishing internal controls is crucial. Best practices include:

Reconciling accounts daily and segregating payment initiation and authorization duties as well as accounts payable and accounts receivable functions.
Using only high-quality standard cheque stock with security features, such as watermarks, and standardizing cheque formats for all accounts.
Securing cheque stock and paper originals of all electronically transmitted payments, changing stock periodically and promptly destroying old stock using a cross-cut shredder.
Eliminating manual or rush cheques and closely examining those that are issued.
Monitoring payment activity carefully and conducting surprise and scheduled audits of your accounts on a regular basis.
Placing stop payments on cheques not cashed in a timely manner.

Fraud Prevention Tips and Takeaways:

BMO Capital Markets is committed to providing our clients with the tools they need to help minimize their fraud risk. The following links will provide further information or convenient takeaways that you can use in your fight against payment fraud.