More corporate clients of big banks are moving to so-called "positive pay" programs to spot fraudulent checks, according to a recent study.

In positive pay, information about recently issued checks is sent electronically to the financial institution so it can notify the company about presented items that the company may not have issued.

The "1994 Check Fraud Survey" from the American Bankers Association found that of the banks that offer the service, a significant proportion (30.3%) of corporate clients moved to positive pay from standard disbursement-reconciliation type services. These moves occurred during a 12-month period ending in April 1994.

While the effect this development will have on fraud losses has yet to be determined, bankers believe positive pay and services like it are necessary if the industry is to cut into the approximately $815 million in check fraud that occurred in 1993.

Larry Forman, an Ernst & Young consultant who specializes in cash management services, noted that the service is not new, but "what's happening is that positive pay is getting a big push from banks."

"Banks are more actively marketing the product and have found their customers to be more responsive," he said.

While over half of the top banks offer such services, the vast majority of banks below $5 billion of assets do not.

Bruce P. Brett, a senior vice president with Richmond, Va.-based Signet Banking Corp., who heads the ABA's check fraud task force, said the number of corporate customers handled by smaller institutions does not typically offset the cost of offering a positive pay service.

"A lot of people don't approach positive pay as a check fraud prevention service," Mr. Brett said. "They think of it as just another account reconciliation tool."

"The first or second time that a bank (or corporation) gets really stung by check fraud, they begin to look at these things more carefully," he added.

Meanwhile some more innovative institutions are looking to augment fraud prevention efforts such as positive pay by sending images of dubious checks over the phone lines back to corporate customers.

Bank of Boston Corp. plans to launch a pilot of such a service in a little over a month. Charles Pierce, product manager with the $44 billion- asset bank, said it will give customers the opportunity to look for altered dollar amounts and "for any signature forgery that might be involved."

"We've had a lot of interest in this," Mr. Pierce said. "That's just natural now that technology is available to provide the suspect items in this fashion. It almost puts the (questionable) check in their hand."

While Bank of Boston is only now testing the image waters, CoreStates Financial Corp. has completed its pilot and is in the process of rolling the service out to its customers.

The Philadelphia-based bank's new offering, called CoreImage, is an interactive image-based disbursement and collection service. Its ThruCheck product sends checks to customers anywhere in the country at a rate of 10 items per minute.

CoreStates claims the technology will open up new areas to the bank geographically, and will subsequently expand its customer base.

"Before image, we couldn't deal with companies that were more than 100 miles from here because they had to get a check to us to meet the return- item deadlines," said Bill Metzger, vice president with the $29 billion- asset bank. "We can deal with any company in the country now."

One of the first customers to go on-line with the product is Cananwill Inc., a Philadelphia-based subsidiary of Aon Insurance Corp.

CoreStates' software automatically dials into Cananwill's system each morning and sends about 300 check images from a relational data base to the company's facilities in Chicago and Irvine, Calif.

The process is completed in about 15 minutes, after which time Cananwill employees can inspect the items for irregularities before they are paid.

John Zimitsky, an accounting manager with the company, said using the service "helps us to manage the risk of honoring drafts by seeing the image. By seeing it, (employees) can make that pay-no pay decision."

CoreStates' service can process 16 customers at the same time. CoreImage was developed in-house using Microsoft Corp. products and a check image processing system from International Business Machines Corp.

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