Cheque fraud is a major threat to small businesses. The modus operandi for these criminals normally is something like this: Someone phones in and places a substantial order for product to be delivered.

The person would typically say they are from a church or an orphanage, or some charitable organization. The most common early warning sign is the urgency at which they require the products.

If there is any pressure, then ask yourself “why?” The other telltale sign is the reluctance to provide a fixed delivery address. The person placing the order will say something like “My driver does not know the area, can your delivery people please meet him at the Brixton Pick ’n Pay?”

Does any of this sound familiar? Any small business owner who has suffered a loss through cheque fraud will agree that it is one of the most expensive business lessons to be learned.

Small business owners, especially starting out, or in desperate need of a sale, will subconsciously ignore these warning signs.

A common way of using stolen cheques is to deposit a fraudulent cheque, claim that they have deposited cash and then change the deposit slip to reflect cash before faxing it to you.

These fraudsters are unscrupulous – one syndicate has defrauded the Post Office, home-based businesses, street vendors and a major appliance manufacturer. They also travel around.

This specific one has been in Port Elizabeth and Roodepoort. The cheque book they are using was “lost in transit” by one of the big banks, probably in a cash-in-transit heist.

The book contained 200 cheques and over 2 years they have used nearly 100 of them. It is still in circulation.

According to Antoinette Louw from the Institute for Security Studies, over 50% of fraud in South Africa is cheque fraud.

Cheque fraud can occur in three ways: forgery (including cloning and forged signatures), stolen originals and fabrication. Increasingly it involves cloning and reproducing entire cheques using sophisticated methods, rather than more rudimentary attempts to alter information on a cheque.

According to the Banking Council of South Africa: “By placing a wide duty of care on the customer, the amendment shifts a portion of the onus in fraud detection from the bank onto the customer and the amendment is accordingly one clearly weighted in favour of the banking community.

It is of interest to note that the change has been criticised as both practically and theoretically unsound and the imposition of such a wide duty on the customer has been expressly rejected in a number of foreign jurisdictions.

One assumes that while banks up to now have been better equipped than their corporate customers to both detect fraud and absorb the costs of fraud and fraud detection, some extra measure may now need to be taken by companies and close corporations to meet the requirements of the Act.

According to the banking council between R800 million and R1 billion is spent annually to protect banks from robbery using video equipment, security equipment and timing devices.

Even though the customer usually suffers the loss when fraud is committed, the banks spend money on the investigation, which costs additional money.

Here is what you can do:

If at all possible, wait 7 days for a cheque to clear before releasing merchandise

If they are pushing you to deliver the product, take the following measures to minimize the risk.

• Ask for an office number of the institution buying the product (they normally do business with a “pay-as-you-go” cell phone number.)
• If they refuse, there is good reason to believe this person is a fraudster.
• Look up the number in the phone book and see if they correspond. Then phone the listed number and enquire about the validity of the order and the person working there.

This is not always foolproof, but at least will weed out the amateurs.

As soon as they fax you a deposit slip or claim that they have paid the money into the account, do the following:

• Find out at which branch the money was paid in (phone your bank)
• Phone the branch and verify whether it was paid with cash or by cheque
• If by cheque, find out which bank issued the cheque and the account holder name on the cheque.
• Get the cheque number, phone the bank whose cheque it is and verify that the cheque is legitimate and whether there is sufficient funds to pay you.

This should take you no more than an hour to verify, but will go a long way to give you peace of mind, especially when there is a significant amount of money involved.

May you never get caught!!!!

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