What is the liability for the check
issuer and the bank?
If the check presenter takes the check to another bank or to a check cashing location and it is discovered that the check is fraudulent, the funds are "taken back" from the customer's account or from the check cashing location and rectified to the check issuer account.
Doesn't this work as an after the fact
fraud protection service?
Correct. The service works to transfer liability of the fraud after it occurs. However, it is important for the company to have consist ant and strong security/fraud prevention features on the "Front End" of the process to give them a strong position of defense should the damaged party pursue the account holder under the "Holder in due course" provisions.
Just like a security monitoring service at your home will not prevent a burglary, the bank, customer and Safeguard cannot prevent fraud. Our best hope is to have "the sign out in the front and the alarm on", which will lead the bad guys to choose a different target; and to have the process on the back end which transfers the liability of fraud in the event that it occurs despite the best preventative efforts.
How is this different from the other references, such as Check 21,
Positive
Pay and Reverse Positive
Pay, all
which have been around
for a while?
All of these are still in force. What has changed is the ability to scan additional information and hold or assign liability based on these changes/upgrades in fraud prevention services. Additionally, more banks are using these services and requiring that their larger customers sign up.
What is the difference between
Reverse Positive Pay and Positive
Pay?
Reverse Positive Pay is performed by the bank. All of the checks received during a business day are imaged and "pushed" to the customer for review.
With Positive Pay, the customer pushes the data to the bank in advance of the check cashing. Checks are then compared to the customers data.