It’s important to understand which payment methods increase the likelihood of fraud given that 74 percent of finance professionals said their companies were victims of payments fraud in 2016 (2017 AFP Payments Fraud and Control Survey). It’s also more necessary than ever to implement controls to mitigate the risks to your operation.
It comes as no surprise that paper checks are the payment method most susceptible to fraud due to their ubiquitous usage in B2B payments. The data included on physical checks is not protected, which makes them an easy target for criminals to duplicate, alter, or manipulate. Check fraud also requires little sophistication and can be carried out with easily accessible technology.
Wire transfers are also a favorite for fraudsters, who often employ Business Email Compromise (BEC) to carry out their spurious requests. Data from the Internet Crime Complaint Center and international law enforcement shows that between 2013 and 2016, over $5 billion in wire fraud losses were incurred domestically and internationally. With multiple ingenious methods to infiltrate business emails, criminals are able to seamlessly and effectively secure unauthorized fund transfers.
Businesses are also reporting commercial and corporate credit card fraud with greater regularity. While these cards allow organizations to streamline purchasing and track expenses, they unfortunately also expose operations to similar risks as consumer credit cards.
ACH debit fraud and, to a lesser degree ACH credit fraud, are also cited by businesses when surveyed about abuses they’ve experienced.
Thankfully, there are a number of safeguards to protect your business against these costly intrusions. Some are broad best practices to apply to the entire enterprise, while other methods reduce risk with regard to specific payment types.
General Best Practices:
- Maintain a segregation of duties where different employees manage each distinct step in the payment process
- Perform regular audits of workflows and payments and reconcile accounts daily
- Confirm changes to banking information with a secondary supplier contact and scrutinize out-of-the-blue requests to change existing processes
- Automate your AP processes and allow your software to enforce adherence to established policies and procedures
- Begin issuing electronic payments via Virtual Card. These cards are valid for one single use and for a predetermined dollar amount. They also have short expiration periods. Furthermore, Virtual Card numbers don’t rely on physical cards that can be copied, stolen, or lost.
Payment Method Specific Best Practices:
- Check Fraud – Implement positive pay, where data about each check (amount, check number, and date) is submitted to your bank for verification before checks can be paid.
- BEC Wire Fraud – Train staff to spot suspicious emails and escalate requests that seem irregular. You can use dual approval to ensure a second set of eyes validates fulfillment of any wire request.
- Commercial and Corporate Card Fraud – Provide proactive and clear communication of usage expectations and transaction limits and only issue cards to select, mission critical employees.
- ACH Debit and Credit Fraud – Setup ACH Blocking for accounts that don’t have ACH activity. This will automatically block all ACH debit and/or credit transactions from posting to your account. You can also utilize ACH filters, which will allow debits only from approved companies.
While protecting your business from fraud may feel like a moving target, you can minimize your risk by becoming knowledgeable about the topic and staying abreast of trends. Educating your employees on what to look out for is your first line of defense. Implementing some of the tactics mentioned above can also limit your vulnerability.