How to Protect Your Company from Payment Fraud

The following article is a guest post by Jennifer Aaron, Vice President and Financial Sales Manager at First Citizens Bank.

Seventy-four percent of finance professionals say their companies were victims of payment fraud in 2016, more than in any other year, according to the Payments Fraud and Control Survey by the Association of Financial Professionals (AFP). Of this targeted group, three in 10 had losses of at least $250,000.

Along with this direct financial hit, companies also faced hefty legal fees and administrative costs to sort out the aftermath.

What can you do to protect your company? A key starting point is understanding the prevalent risks and how to respond so you can recover quickly.

Related: Business Banking Mistakes You Might Be Making as an Entrepreneur

Types of Payment Fraud

Thieves have devised creative ways to attack almost all types of transactions. Common schemes include:

Checks

Three-quarters of companies that fell victim to payment fraud in 2016 experienced at least one instance of check fraud, the AFP study revealed. Common check fraud schemes include:

• Altered checks: This occurs when a check has already been issued, but data fields on the check are changed to reflect alternate, fraudulent amounts and payee names.
• Counterfeit checks: Advances in software applications and printers have given fraudsters a way to create imitation checks if they have a company’s bank account information.
• Forgeries: Often involving stolen checks, forgeries occur when there is an unauthorized signature from the payer or endorsement from the payee.

Electronic payments

Wire transfers and Automated Clearing House (ACH) transactions — both of which involve moving funds between bank accounts — are increasingly targeted, coming in at the second and fourth highest forms of fraud, respectively, according to the AFP report.

In some cases, all that is needed to initiate the fraud is an organization’s bank account information. A primary reason for the recent spike in electronic payment fraud is from wholesale hacking schemes known as “imposter fraud,” which target company employees who have access to sensitive financial data.

Credit cards

Thirty-two percent of companies reported at least one instance of corporate credit card fraud in 2016, according to the AFP. Unauthorized users, whether an employee or outside individual, commit this type of fraud by using a corporate credit card to make unapproved purchases.

Credit card fraud can occur when company cards are lost, stolen or duplicated as counterfeit cards. Credit cards can also be obtained through “account takeover” in which a fraudster gathers company financial data and contacts the bank to report a change of address and lost card. They are then sent a replacement card, giving them access to a company’s finances.

To learn more about protecting your company from payment fraud, contact Jennifer Aaron of First Citizens Bank.

Jennifer Aaron, Vice President, Financial Sales Manager
First Citizens Bank
2050 Round Rock Ave | Round Rock, TX 78681