Office of the Comptroller of the Currency

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Check Fraud: A Guide to Avoiding Losses

Internal Controls to Prevent Check Fraud by Insiders

Unfortunately, dishonest bank employees can be involved in check frauds. Internal controls that can help prevent check fraud by bank insiders include:

• ensure that account changes, such as adding names or changing addresses and/or other information, are authorized by the customer in writing, or in a way that guarantees that the customer is requesting the change.
• establish special protections for dormant accounts, such as requiring extra approvals and mandatory holds, and maintain special security for signature cards.
• maintain permanent signature cards for each account and keep files and appropriate documentation for business accounts (e.g., a certificate of incorporation, recent federal tax return, etc.).
• separate duties to ensure that no one person in the bank, acting alone, can commit check fraud.
• ensure that persons other than those who open accounts or prepare statements handle night depository, ATM, ACH, and mail deposits.
• ensure that customer complaints and discrepancy reconcilements are directed to staff who are not account openers, tellers, or bookkeepers.
• check the backgrounds of new hires.

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