Protecting Your Business from Fraud
Fraud remains at all-time highs, particularly in the business world. According to the Association of Finance Professionals’ (AFP) 2023 Payments Fraud and Control Survey, 65% of businesses said they’ve been victims of fraud attacks or attempts in 2022. Of those that were payments fraud victims, more than one-quarter (27%) were able to successfully recover at least 75% of their business’ lost funds. However, nearly half (44%) were unsuccessful in recouping any funds.
Combatting fraud is a group effort, requiring diligence from business owners, employees, and banking partners. Here are tips to help your small business protect itself.
Tip 1: Get Rid of Paper Checks
The AFP reports that 63% of respondents experienced fraud activity via checks. In addition, according to the Financial Crimes Enforcement Network, reports of check fraud in 2022 nearly doubled from the year prior. These statistics emphasize that although check use has been declining for several years, check fraud is still alive and well.
Rather than feeding into this trend and potentially opening your business up to an attack, move to Automated Clearing House (ACH). ACH payments work as electronic payments, delivering them directly via a bank-to-bank transfer. This ensures money arrives quicker to its intended recipient and it has a much lower rate of fraud attempts than any other payment method.
Tip 2: Use a Layered, Preventive Approach
There is no silver bullet. Be proactive to protect your business by using multiple protections, rather than putting all your eggs in one basket.
First, create internal policies and procedures to monitor your accounts. At minimum, use a checklist to ensure accounts are reconciled daily and establish other best practices. Evolve the checklist into a formal policy that changes and flexes as needed over time. Include a financial emergency kit as part of this policy that outlines next steps in case you are a victim of a fraud attack or attempt.
Next, divide and conquer your business’ financial burden with dual control — a separate preparer and approver (most likely the business owner) of finances. A second set of eyes can help spot errors or attempted attacks, avoiding lost time and money.
Finally, consider cyber insurance for your business. It’s important to remember that while the FDIC is great at protecting your business from bank failure, they do not offer fraud protection.
Tip 3: Update and Educate Yourself and Your Employees Regularly
It’s important you don’t take day-to-day procedures for granted. In AFP’s survey, 71% of organizations that experienced a fraud attempt or attack cited email as the method.
To minimize the likelihood of falling victim to one of these attempts, weave security updates into your business’ policy by creating prevention guidelines, which can include regular software updates; avoiding email from unknown senders/verifying the sender’s identity; and keeping your personal and work technology as separate as possible (i.e., having separate work and personal computers). You can keep yourself and your employees updated on guidelines and procedures, aswell as any current or new scams floating around, with a refresher meeting at least quarterly.
Tip 4: Make Sure Your Banking Partner is a True Partner
As one of the best protectors of your business from fraud, it’s vital to develop a strong relationship with your bank. Make sure you get to know your banker so they’re more familiar with you and your business. This allows them to better understand the specifics of your business’ needs and will give you peace of mind that your finances are in good hands.
If you suspect you’re being attacked or are a victim of fraud, reach out to your bank as soon as possible to review and make any needed changes to your accounts as soon as possible to protect you, your customers, and your business.
While fraud can be an intimidating and frightening prospect, being prepared is always in your best interest. Remember to keep these tips in mind, and partner with a bank who gets to know you and your business personally — a strong relationship is key to building a foundation of security and success.
About the Author – Ray Abbott
Ray Abbott is Senior Vice President, Head of Treasury Management at WSFS Bank. He is a Community Banker local to the Greater Delaware Valley with extensive experience driving commercial and municipal deposit growth and related non-interest revenue, profit and client loyalty.