Opinion: 4 tips to help reduce your business’s exposure to fraud

Becky Gullett

As digital transformation accelerates, businesses have renewed their focus on security, stability and fraud mitigation. That’s with good cause: The rapid movement of large amounts of money in today’s digital era provides ample opportunity for fraudsters to exploit any loophole they can find. This is further compounded by the continuous technological changes within corporations, which inadvertently open more avenues for these criminals.

Financial institutions encourage businesses to proactively pay attention to security-related matters and have outlined several strategies to help protect businesses from falling victim to fraudulent activities.

1. Educate employees on how to reduce fraud in the workplace. It is crucial to educate all employees, particularly those with access to the company’s payment systems, about how to avoid fraud traps. As fraud becomes increasingly sophisticated, businesses should elevate their vigilance levels and train employees to be cautious of potential scams.

Business email compromise continues to be a significant source of fraud, with phishing emails growing more difficult to detect. For example, such emails may appear to be genuine messages from an established vendor seeking to update their contact information. A seemingly harmless phone number change can be the first domino to fall in a chain that leads to a legitimate payment being routed to a scammer.

Regular training and communication should include a wide range of topics:

• Best practices for internet and mobile device security

• How to spot potential phishing emails

• Policies and procedures for issuing and receiving payments

2. Monitor for fraudulent payments. Mail theft, check washing and business identity theft are on the rise. Despite a decline in the use of checks overall, mail theft for the purpose of check fraud has continued to spike in recent years.

Businesses should work with their banks to add extra layers of monitoring. For example, some banks offer services that allow businesses to provide details about the checks they cut, so the bank can cross-verify payments to ensure funds go to the intended recipient. Similar services exist related to ACH payments.

3. Update internal systems to mitigate the risk of fraud. Moving from manual systems to digital accounts payable and receivable functions is another way businesses can mitigate their risk of fraud. These systems make it possible to track transactions in real time and provide a clear audit trail, so it’s easier to spot any irregularities or suspicious activities promptly. They also allow businesses to implement more robust user permissions, such as two-factor authentications and PIN codes, which help ensure only authorized employees can access banking and other payment information.

Requiring dual approval on transactions is another effective internal control to implement. Doing so not only prevents a lone bad actor within a company from committing fraud, it also provides an additional layer of protection from scams that attempt to trick an employee into issuing an improper payment. Financial institutions recommend businesses separate the tasks of originating transactions and verifying or reconciling payments. Systems can also require one person to authorize the creation of an electronic payment and a second person to authorize the release of the payment.

4. Respond to fraud quickly. If a business falls victim to fraud, there’s no reason for employees or leaders to feel embarrassed. Remember: Fraud is common and sophisticated.

Staying ahead of fraudulent actors is critical, as they can often be as structured and coordinated as a large company would be. It’s not the cliché of somebody sitting in their basement. Fraud today is much more advanced.

Accounts payable and receivable departments are one of the most vulnerable areas of fraud for any business. Implementing fraud mitigation controls can help reduce human errors or interventions, detect suspicious activity, shield your business from cybercrime and identify reconciliation discrepancies.

Becky Gullett is vice president and Treasury management team lead at Commerce Bank’s southwest region. She can be reached at becky.gullett@commercebank.com.