Does positive pay service from a bank help protect the account holder (government) or the person receiving funds?

Positive pay service is primarily a fraud prevention tool that offers significant protection to the account holder, in this case, the government. The service works by comparing the checks presented for payment against a list of checks that have been authorized for payment by the account holder. This validation process ensures that only checks that match in terms of check number, amount, and date (among other factors) are honored.

When a check that does not match the authorized information is presented, the bank will flag it as a potential fraud attempt and will either seek confirmation from the account holder before proceeding or will simply not honor the payment. This method directly mitigates the risk of unauthorized transactions and enhances the security of the account holder's funds.

The other options focus on perspectives that do not align with the primary purpose of positive pay. While the payee may benefit indirectly from the assurance that their payments are processed correctly, the service is specifically designed to protect the entity that holds the account from potential fraud.