Are Your Check Transactions Secure Enough?

• Published date: 01 November 2013
• Author: J. Ralph Byington,Jo Ann McGee
• Date: 01 November 2013
• DOI: http://doi.org/10.1002/jcaf.21902

15

© 2013 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com).

DOI 10.1002/jcaf.21902

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Jo Ann McGee and J. Ralph Byington

According to the

Association of

Certified Fraud

Examiners (ACFE),

asset misappropriation

involves the misuse or

theft of an organiza-

tion’s assets (ACFE,

2012). This type of

white-collar crime

(WCC) can be subdi-

vided into two types:

(a) noncash misappropriations

such as inventory or equipment;

and (b) cash misappropriations

(CMs), which includes cur-

rency, checks, and money orders.

Clearly, cash is the most com-

monly targeted asset. The ACFE

reported in its 2010 Report to

the Nations on Occupational

Fraud and Abuse that the mis-

use or theft of cash represented

85% of asset misappropriations

with the median cost of cash

schemes varying from $23,000

to $131,000 based on the type of

scheme (ACFE, 2010).

Reports of CMs by dis-

honest employees appear in

the press on a daily basis. As

examples, recent stories involve

embezzlements of: (a) $500,000

by a former synagogue president

(Glista, 2013), (b) $482,144 by an

Cash misappropriations—which include currency,

checks, and money orders—is the most com-

mon target of white-collar criminals. And check

tampering is one of their most common methods.

This article explains the different types of check

tampering schemes that dishonest employees

use—and how to prevent and detect them.

© 2013 Wiley Periodicals, Inc.

Are Your Check Transactions

Secure Enough?

American Red Cross employee

(Griffin, 2012), and (c) $500,000

by a Trident Seafoods employee

(Barrett, 2013). One of the most

common methods employed

by the perpetrators of this type

of WCC is check tampering.

Therefore, the question begs, are

your check transactions secure

enough? The purpose of this

article is to make the chief execu-

tive officer (CEO), chief financial

officer (CFO), and the treasurer

aware of the types of check tam-

pering (CT) schemes being per-

petrated by dishonest employees,

as well as how to prevent and

how to detect CT schemes.

FRAUDULENT DISBURSEMENTS

Cash misappropriation

schemes are generally divided

into three catego-

ries: (a) fraudulent

disbursements, (b)

skimming, and (c)

cash larceny. Of the

three categories,

fraudulent dis-

bursements occur

most often (ACFE,

2012). Fraudulent

disbursements occur

when the perpetra-

tor causes the organization to

disburse funds through some

device or trick. For example, the

American Red Cross employee

doubled her salary through

the use of technology. She also

manipulated vacation and com-

pensation time to increase her

paycheck (Griffin, 2012).

Examples of fraudulent

disbursements may occur in bill-

ing, payroll, check tampering,

expense reimbursement, and

register disbursement schemes.

Check tampering schemes are

unique among fraud disburse-

ments because the fraud per-

petrator actually prepares the

check, while the other schemes

rely on trickery in that the

company is fooled into making

a payment to the perpetrator

(Albrecht, Albrecht, & Albrecht,