GUEST COMMENTARY: Fraud Prevention: Protecting your company and employees


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Fraud schemes today are more pervasive than ever and often employ a high level of technical sophistication. By taking some essential prevention measures, you can significantly reduce this persistent threat to your business — and do it without requiring considerable costs or resources. Here are some suggestions I give my local Alaska clients.

Winning the Fight Against Fraud

Based on the 2012 Association for Financial Professionals Payments Fraud and Control Survey, 61 percent of organizations experienced attempted or actual payment fraud in 2012, and 85 percent of companies reported that the number of fraud incidents increased or stayed the same compared to the previous year.

The study also contained some good news. Nearly three-quarters of organizations that were subject to at least one payment fraud attempt in 2012 did not suffer actual losses from the attempt — and that’s largely due to the effectiveness of fraud detection and controls at these companies.

While no amount of planning and oversight will ever completely eliminate fraud, there are a number of proven measures you can take to protect your business.

Safeguard Your Bank Accounts

Though check fraud remains the dominant form of payment fraud, electronic fraud is on the rise.

Fortunately, banking services designed to protect businesses are evolving as well. Your bank can help identify, design, and implement strategies to address your company’s needs in many key areas.

Steps you can take to protect your deposit accounts include reconciling your account activity daily, using a wire funding account, opening a separate payroll account, and implementing Positive Pay and Electronic Payment Authorization on your accounts.

Protect Yourself

As fraud schemes have become more technologically sophisticated, it’s become essential that you and your staff adhere to safe online and mobile behavior. Best practices to help protect your computer, mobile devices, and associated banking accounts from inappropriate use include:

• Monitoring your accounts closely and frequently, and being proactive in working with your IT/Security professionals.

• Following your bank’s safe login procedures and only entering your financial or account information on secure sites.

• Being suspicious of any unsolicited messages or attachments, and very selective about giving out your contact and personal information.

• Never sending funds to unknown individuals, or responding to urgent crisis messages from known senders without first verifying the request.

• Locking computers and mobile devices whenever left for even short periods of time, and using dedicated computers for bank business.

• Notifying your bank as soon as possible about any suspected unauthorized debits. Businesses have a much shorter window than consumers, and a delay in reporting fraudulent charges will cause a loss to the company or the bank.

• Developing a forum in your company to routinely discuss security best practices.

Optimize Your Company Processes

Your company’s internal controls are another essential line of defense against fraud. It’s critical to review your internal controls periodically, looking for areas for improvement, identifying weaknesses, and adapting to changes in structure, operations, or the market that may call for new controls. An effective evaluation will break down the analysis into specific accounting areas: cash disbursements, cash receipts, general journal entries, month-end procedures, and payroll.

One additional area where I’ve seen a need for emphasis is in developing procedures around handling account change requests for payment to vendors. Over the past year we have seen a new scam locally where someone masquerading as a vendor will send an email asking a client to wire payment to a different account number — which is fraudulent. A client of mine recognized the email address, and obliged … losing money. So even if you recognize the email address, it’s vital to make a phone call to verify the request is legitimate.

Your company’s accounting firm is an essential resource in determining that your internal controls are functioning optimally. In the end, effective fraud prevention requires the right blend of process and technology.

While fraud is growing, protection measures are improving. Following best practices and implementing smart internal controls will help protect your accounts and computer systems.

Matthew D Hansell is a Senior Cash Management Advisor for KeyBank. He can be reached at 907-564-0446 or matthew_d_hansell@keybank.com.

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