The payee line on a check can be used for a lot of things. For years, banks have provided services to businesses that help reduce fraud, one being positive pay that can also include evaluation of the payee line. This is typically called the “Payee Positive Pay.”
In these cases, the fraud is associated with altering the check in some manner. In order to provide this service, the bank customer must provide a list of all the checks along with the pertinent check data, typically the date, amount, account number, check number, and payee. This list is then used to verify the check when it is presented.
Payee Line and Fraud Prevention
However, there are other uses for the payee line in the fraud prevention arena that go beyond typical check fraud, one of which is to detect money laundering. Generally placed under the umbrella called, “anti-money laundering,” there are a number of regulations and requirements with which financial institutions must comply.
An area that could involve scrutiny of the payee line can include the capability of searching against special lists of prohibited or high-risk individuals and entities when a check is presented. A bank armed not only with the check amount, but with the payee information could detect when a customer sends funds to an individual or entity that warrants further investigation—and do so automatically.
Automated Data Extraction for Rapid Fraud Prevention
In some cases, regulatory bodies are requiring automation in order to ensure that a sufficient amount of coverage can actually be accomplished. Where there are no automation requirements, these regulatory agencies are strongly recommending it since the penalties for allowing laundering activities to go unnoticed—when they could easily have been detected—can be quite harsh.
The good news is that there is technology that can automate the extraction of this information and even support simple matching against a defined list. There is also technology that can help to search through the payee line to detect specific words that might trigger an audit. Both of these functions can be combined to provide the bank with more automated compliance.