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Risk Assessment for for Check Transactions
All check transactions involve some risk of loss, but the risks can be controlled. The most effective risk control is to strictly follow the identification procedures previously discussed. The following are recommendations to further assist in controlling losses and in helping us successfully prosecute those who knowingly or intentionally violate the law.
Out-of-state checks are more risky than checks drawn on local banks. They are more difficult to collect and in some cases may not be able to be prosecuted. The risk of loss revenue is much greater with out-of-state checks.
Your check acceptance policy should limit personal checks to the amount of purchase unless there is a business necessity for cashing checks. While some NSF checks are fraudulently written for small amounts, the motive behind most check fraud is to obtain money or merchandise that can be readily turned into cash.
As in the case of personal checks, you should not accept payroll, government or business checks for more than the amount of purchase unless there a business necessity for cashing checks. As just noted above, the check defrauder’s motive is to obtain money or property which can be readily turned into cash - often times by seeking refunds in cash from your business. Most forgeries involve the use of business or government checks. Checks are frequently stolen and blank checks are often sold on the “street.” The face amount of these checks is often great enough to justify the forgery of identification as well as the check. As to business checks, if they are dishonored, it is often difficult to prove that the drawer knew that the account was overdrawn. Frequently there are several persons authorized to sign checks, each of whom, when confronted with a returned check, claims he or she didn’t know about the checks the other person wrote.
Do not accept personal checks made payable to someone else. In other words, accept only personal checks made payable to your business. “Two party” checks that are dishonored usually cannot be pursued through prosecution. The merchant takes these checks subject to all the defenses that exist between the two parties to the check.
If your intention is to accept a check as the
equivalent of cash in a transaction, do not accept a “post dated” check
or agree to hold a check “until
I can make a deposit.” As to both the “post dated” and “agreement
to hold” checks, you have, as a matter of law, extended credit to
the passer. These checks become promissory notes, and consequently there
is no crime committed if they are dishonored. Your only remedy is a civil
suit.
Never accept a check where there is any indication that it has been altered
to represent a different amount than the amount for which the check was
originally written. Ask for another check in the proper amount. This
rule obviously doesn’t apply where a minor error is made. But where “One Dollar” has
been changed to “One Hundred,” or the like, do not accept the check. This
is the only way you can be sure that the passer is in fact the drawer of the
check.