Banking clients who still use cheques mistakenly assume that fraudsters are less likely to target them. Photo: File

DURBAN – Banking clients who still use cheques mistakenly assume that fraudsters are less likely to target them. 

This is due to it being a physical payment instruction, in which clients sign for cheques as if it’s a legal document and still needs to be cashed out or deposited into an account through a physical bank branch.

Kenneth Matlhole at FNB Business said that it is essential for the financial services industry to educate the large portion of businesses and individuals that still have cheque payments built into their processes, about the drawbacks and risks associated with them.

He demystifies some of the common myths about cheque fraud: 

Less attractive to criminals 

Fraudsters are still very much aware of the loopholes for exploiting this form of payment.

This is one of the reasons why the use of cheques has significantly declined. According to BankservAfrica, annual volumes for cheques have decreased - the use of cheques declined by 29.5 percent between 2017 and 2018 in South Africa, and the values have declined by 22 percent during the same period.

Matlhole, "The common methods of fraud include the use of fake cheques, cloning and forging of signatures if a cheque book is lost or stolen". 

He added that in some instances, businesses use two signatories to sign-off cheques as a method to ensure governance and security to the bank account. To simplify the process of always having two signatories available to sign, blank cheques are often signed in advance so that when funds are required only the amount needs to be populated. This process exposes businesses to the risk of altered cheque fraud. 

Not prone to technology-enabled crime 

Given the manual paper-based process involved in writing out and signing a cheque, some businesses still hold the view that criminals cannot use technology to swindle money from them. This is untrue as criminals are constantly innovating and looking for new ways to defraud their victims.

Criminals have evolved from using scanners and photocopiers to more sophisticated means such as SIM swaps, coupled with the cloning of the victims’ cheque books as a method of identity verification to carry out fraud.

Risk mitigation to reduce fraud 

The reality is that cheques have rapidly become an outdated form of payment, which is highly susceptible to fraud.

Even if a business adheres to best cheque fraud risk management practices, such as keeping the cheque book safe, limiting the number of signatories, using a unique pen and type of ink etc, there is still a high probability of being defrauded.

"The multitude of risks associated with this form of payment has resulted in many businesses, shops and retailers no longer using or accepting cheques," said Matlhole.

"Banks have a number of digital payment solutions that businesses and institutions, such as schools can use to make immediate, safer, convenient and more cost-effective payments, such as online banking, Electronic Funds Transfer (EFT), Real Time Clearance, card payments and mobile banking," he concluded. 

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