October 01, 2003

 

 AVMA Answers - October 1, 2003

Posted on September 15, 2003
 

AVMA Answers

Given the profusion of fraudulent activity reported by news sources, has the AVMA ever encountered fraud in its financial transactions?


Dan Murawski,
director of the AVMA
Business Division
responds:


Yes, check fraud. In the fall of 2002, a check that was payable in the amount of $310 was forged to $42,310, and with a new payee. Apparently, the original check issued by the AVMA was diverted and never reached its destination. Software is available that allows the forging of checks that resemble those of an organization or individual. The AVMA's bank questioned the authenticity of the check, thereby preventing it from clearing the bank account.

Shortly after this occurred, three more checks were altered from the original check and submitted for payment. At this point, the bank was monitoring our account and questioned checks that were suspicious. As a result, all of those checks were returned, unpaid.

The bank's corporate security department suggested setting up the process of "positive pay." The AVMA and the bank subsequently instituted this process. Positive pay is a security procedure that protects against losses. The AVMA and the bank carry out this procedure via the Internet. After every check run, the AVMA provides the bank with a list of checks produced. This list includes each payee, the check number, the amount, and the date of the check. Before a check clears, it has to exactly match information on the list.

Every workday, the AVMA goes online with the bank to determine whether any checks that are not on the list are trying to clear our bank account. If a check does appear as an "exception item," the AVMA will determine whether the check is legitimate or counterfeit.


What happens if the AVMA does not go online to check positive pay?

If the AVMA does not review the positive pay and there is an exception item trying to clear the account, the bank will automatically return the check unpaid. This is to protect the Association. As an extra feature to prevent the return of a good check, the bank will also e-mail the AVMA when there is an exception item. This will alert the AVMA to review positive pay.


Has any check fraud occurred recently?

Yes. In June 2003, another counterfeit check, this time for $7,692.35, tried to clear our account. The positive pay procedure prevented this check from clearing the AVMA account, and it was returned as a fraudulent item. Also, the bank's corporate security department was notified and is conducting an investigation. We do produce a lot of checks and, according to our bank, a large number of business operations are experiencing similar problems.

 



Is it worthwhile for other veterinary organizations to inquire about the positive pay process?

Yes, if there is a likelihood that an organization is vulnerable to check fraud because it issues a lot of checks and disburses them nationally or internationally. To ward off possible problems, veterinary organizations and businesses can contact their local banker to inquire about this process and other security precautions.