As long as there have been businesses, there has been fraud. Today it’s a compelling problem. The pace, the means and the volume of transactions have increased in recent years, with fraudulent activity growing exponentially to match. While the negative impacts of fraud are well-documented, the measures businesses can take to minimize their risk are less well-publicized. Read on for a comprehensive overview of what you’re facing—and get fraud prevention tips to help safeguard your organization.
The threats
In the age of continuous digital transactions, credit card fraud—a broad category of crimes involving the unauthorized use of credit or debit accounts to purchase goods or extract funds—has become extremely prevalent. The potential exposure of private financial information to digital networks makes this form of fraud attractive to cybercriminals, who can potentially use numerous methods to skim useful information. More troubling still, cyberattacks on business data—calculated efforts launched in an attempt to gain unauthorized access, often in the form of ransomware—are on the rise.
Another common tactic, payment fraud, involves illegal transactions conducted by cybercriminals, including unauthorized payments and false refund requests. This is a common form for crimes committed with stolen data. Payment fraudsters often use emails, text messages or phone calls to gain access to information or impersonate individuals in order to secure goods or funds. Another heavily-used tactic is invoice fraud—involving false or inflated invoices, usually sent by email—and check fraud, which encompasses forged and falsified checks.
Beyond the threat to a firm’s financial well-being, these types of fraud carry the serious risk of affecting employee and consumer trust, as well as brand image through unflattering publicity, all of which can lead to the loss of staff, resources and profit.
“Fraudulent transactions cost businesses across California billions of dollars,” said Jan Mitrovich, Director of Corporate Services and Treasury Management for California Bank & Trust. “But there are ways to fight back. Criminals may grow more sophisticated but so do our ways of stopping them.”
The defense
Safeguarding payments and reducing risk are fundamental, both for your business and your customers. Fortunately, there are several easy steps you can take. First, and to the greatest extent possible, avoid sharing information with third parties. Minimize the number of credit cards your business uses and review all statements carefully. Destroy and dispose of old statements promptly and securely. Implement Mobile Card Fraud Alerts, which can alert you to most potentially fraudulent transactions. Urge your customers to do the same.
There are likely to be repeated attempts of check and invoice fraud. Services like Positive Pay, which help compare checks issued or written to checks received for payment and provide early detection of unauthorized activity, are especially useful as a defense mechanism. At the same time, these tools can help reduce fraud involving ACH debit card transactions linked directly to checking accounts.
Check and invoice fraud solutions
With Positive Pay, only checks which have been previously approved by your organization are paid and notifications are issued for mismatched checks, helping to reduce the potential for fraud. Depending on your circumstances, you also may wish to consider a service called Check Block, which automatically rejects paper transactions, in favor of electronic payments that are more easily monitored for irregularities.
There are tried-and-true methods to help prevent invoice fraud. Closely monitor all invoices, even those involving small transactions. Institute a matching process between invoices and receipts while being sure to track and regularly evaluate all invoice activity and vendor approval processes.
Cyberattack incidents such as ransomware often can be reduced with a focus on employee training. Updating software regularly also is crucial and running a secondary anti-virus software is highly advisable. If your business does not already have a cybersecurity plan, be sure to develop one. Give your fraud defense a significant investment with system security and a dedicated and timely protocol for reporting cyberattack incidents. While you can’t prevent all assaults, ensuring that you have reliable technological resources to lodge a solid defense is key.
Like any strategy, the whole is greater than the sum of the parts. Put tactics together for a comprehensive, end-to-end defense against common forms of fraud. Don’t know where to start? The professionals at California Bank & Trust can help you implement a united approach to fraud prevention with today’s leading-edge tools such as Mobile Card Fraud Alerts, Positive Pay and Check Block services. Get a new level of protection against fraud. Learn more here.