Business fraud is at a record high – according to a recent report by the Association for Financial Professionals, 74 percent of businesses experienced attempted or actual fraud in 2016. That’s why it’s important for organizations – both big and small – to take precautions to safeguard their finances.
There are several ways a business can fall victim to fraud. Checks are one of the most common payment methods targeted by fraudsters, usually in the form of fake or stolen checks. Sometimes businesses will even get a call asking them to change payment instructions for a vendor, which then leads to money being sent to a fraudulent account.
Another common type of business fraud involves wire transfers. Criminals are becoming more sophisticated and are able to learn the responsibilities of employees with financial roles in the company, such as who has the authority to approve wire transfers or who gives payment instructions. They get to know schedules of key company officers to plan the scheme when they think the company is most vulnerable. This type of fraud often looks like an email coming from a principal, such as the company chief financial officer, with instructions to wire money to a fraudulent account.
There are many other types of fraud that can damage your business, even to the point of causing it to close. So it’s important to be proactive about preventing fraud. That’s why I recommend businesses take the following steps to help protect their finances:
- Improve internal controls – Make sure your company and employee identities and passwords are secure. Avoid using a Word document or email to keep track of login information. Also make sure you use strong passwords that include uppercase and lowercase letters as well as numbers and special characters.
- Reconcile accounts daily – It’s a best practice to check your accounts both manually and electronically. Balance your checkbook and make sure there are no unauthorized checks going through.
- Add dual controls and approvals – Especially when sending a larger dollar amount, it’s smart to have more than one person approve the amount.
- Use Positive Pay – This is a great tool that helps protect against check and ACH fraud. The business supplies the bank with all issued checks, and specifies an approved vendor list. If anything comes through that’s not on the list, the bank will warn the company, and it won’t get paid unless the company approves.
- Set up an internal fraud hotline – Often employees notice fraudulent activity but may be too afraid to say anything. An anonymous reporting system can help increase the odds people will report fraud when they see it.
Bank Mutual is vigilant when it comes to helping businesses mitigate risk. Our treasury management team and commercial bankers can help business owners fine-tune their fraud protection process and help them gain peace of mind that their finances are secure.
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