Fraud prevention doesn't always require large expenditures or sophisticated technology. More often, it comes down to simple controls that address common fraud vulnerabilities. Many banks offer tools that can strengthen payment controls, but businesses must make sure the tools are properly activated and consistently used. Other safeguards depend on well-designed internal procedures and employee compliance. Here are eight practical controls to help protect your business:
- Transaction approvals. Certain types of transactions are inherently risky because of the amounts involved. To make sure wire transfers are properly authorized, many banks offer dual approval. This involves two — and sometimes three — levels of approval using separate logins and passwords.
- Bank-change callbacks. If the bank receives a request from your business to change account information, it should verify the request by calling a known, trusted phone number — not the number included in the request. This helps prevent fraudsters from taking over your account and removing your access.
- Mailbox controls. Limit access to mailrooms and post office boxes and regularly review incoming payments to prevent interception or alteration. Require employees to be authorized by their supervisors to open envelopes containing checks.
- Positive pay/reverse positive pay. With positive pay, your business compiles a list of issued checks, and your bank pays only those on the list. As its name suggests, with reverse positive pay, your bank compiles a list of checks presented for payment. You must approve or reject the listed checks before the bank pays them.
- Account alerts. Notifications of new deposits or pending withdrawals exceeding a certain amount provide nearly instant notice of account activity. Enable alerts so you can take quick action if any newly posted transactions appear fraudulent.
- Daily account reconciliation. Reconciling accounts daily can quickly uncover unauthorized transactions, missing deposits, duplicate postings or suspicious withdrawals. It's particularly helpful for Automated Clearing House (ACH) transactions, which may need to be reported to your bank within 24 to 48 hours, depending on the circumstances.
- Debit, ACH and wire controls. Your bank may offer debit, ACH and wire blocking (stopping all debit, ACH and wire transactions from posting). Blocking is especially important with nonoperating accounts. ACH filters let you approve specific originators or block unauthorized debits before they post.
- Transaction limits. Limiting the size of transactions individual employees can authorize is a core antifraud control. For example, you might require employees to obtain manager approval for transactions over $2,500. Even if a worker attempts to commit fraud or someone's account credentials become compromised, financial losses may be capped at a relatively low amount.
These controls may seem like common sense, but ensuring that they're active and that employees consistently follow them isn't always easy. It requires vigilance. Contact us for help identifying and addressing control gaps and training your managers to follow payment procedures consistently.
