You might think that fraud can’t happen to you, but business fraud is on the rise and happens much more frequently than you might imagine.
Ten years ago, we were only seeing a handful of fraud attempts each year. Today, we uncover fraud attempts every single week. In fact, I’ve seen more fraud in the last year or two than I had previously witnessed in the first 35 years of my banking career combined.
Why? In the past, financial losses used to happen in the form of bank robberies, and robbers were almost always caught either at the scene or shortly afterward. Now, fraud is easier to get away with because it happens anonymously from anywhere in the world. Modern-day “robbers” can be hard to catch after-the-fact and often even harder to prosecute.
While it’s exceedingly easy to convince someone who has been affected by fraud to take precautions for the future, we prefer to have that conversation before it’s too late.
We encourage businesses to take the following steps to protect themselves and strengthen their defenses against fraud.
Layers of Protection
In the world of fraud prevention, there is no one single silver bullet that solves all the world’s problems. The key is to layer a variety of security measures to enhance protection and provide multiple opportunities to prevent a problem.
Fraud protection is particularly important for businesses because:
- The timeline is short. Businesses only have 24 hours to report a fraud attempt.
- The losses can be substantial. Business transactions are usually occurring on a larger scale in much larger dollar amounts.
- Recovering funds is rare. Banks don’t have a way to reverse fraudulent transactions, so businesses need to pursue criminal investigation and litigation, which don’t have a strong history of success.
Therefore, having a conversation with your Treasury Management expert at Lake Ridge Bank can help you anticipate areas of vulnerability and explore options to strengthen those layers of protection.
Basic Protections
Interestingly, some very low-tech solutions can create initial protections, such as:
- Avoiding mail theft by using a PO Box for receiving mail and bringing outgoing mail directly to the post office or a secure mailbox
- Reviewing your bank account activity daily
- Locking up checks in a desk drawer or safe to limit access
- Setting up basic alerts for to monitor certain types of transactions
- Using multi-factor authentication for bank logins and other sensitive accounts
- Never change vendor payment information without verification. If you get a call or email from a vendor to change their address, account number, or other payment information, always reach out to a known contact and verify separately.
All businesses regardless of size or scope can take these first-level precautions.
Advanced Tools: Positive Pay
The next layer of protection comes in the form of more advanced technologies available for detecting inconsistencies in your accounts payable transactions.
Lake Ridge Bank offers a fraud prevention tool called Positive Pay that can compare a list of approved transactions to real-time ACH activity or checks presented for payment from your bank account.
The process helps uncover any issues where a check may have been altered, an unauthorized check may have been issued, or a fake ACH transaction is attempted, among other fraudulent activities.
Essentially, your business creates an approved transaction list using your existing bookkeeping or accounting software that gets uploaded to your Lake Ridge Bank Positive Pay system.
Positive Pay then compares any requests for payment from your business account to your approved list and notifies you of inconsistencies for your review. An approved employee from your company can then review an image of the flagged transaction online and mark it as “Don’t Pay” or “Approved to Pay.”
Important to Use Properly
One question we get fairly often is “why doesn’t everyone use Positive Pay?”. The answer is that it only works as good as your company’s commitment to use it properly. It does require some effort and essential timing on the part of your accounts payable team.
While very simple, there are some extra steps involved in using Positive Pay, including:
- Creating a list of checks and approved ACH transactions. This can be done using your existing software, such as QuickBooks. We can map our system to match whatever software you use.
- Uploading your list into the Positive Pay system using your online portal on our Lake Ridge Bank website.
- Positive Pay reviews and compares all transactions overnight and sends a notification of any discrepancies by 6:00 am.
- Your approved employee must review and act on all notifications within a few hours each morning. If no action is taken on notifications by mid-morning, then the payment is denied as a precaution. This is important because if an essential payment is denied, such as a utility payment or a rush order, then it could have unintended negative consequences. However, the system is set up to err on the side of preventing fraud.
Your Business Banker or Treasury Management expert gets you and your designated employee(s) set up and trained to do each step properly, quickly, and easily. And we offer support at every step along the way, if needed.
Your Bank is on Your Side
As a bank, we always verify that our client is who they say they are, but we can only verify on our end.
By working together and providing tools you can use for efficient and effective fraud prevention, bad actors will find it much more difficult – hopefully impossible – to overcome our combined efforts.
Contact your Business Banker or a Treasury Management professional at Lake Ridge Bank today to schedule a conversation about the right mix of fraud prevention tools for your organization.
