While we’ve written about How to Spot and Avoid Scammers, focusing on tips for individual customers, businesses often face elevated risks when it comes to fraud. With greater pools of assets and resources on the line, as well as more individuals accessing accounts and technology, businesses are often key targets for scammers, particularly ones working online. And unfortunately, Texas ranks number three in the country for cyber-attacks.
As a trusted bank in Texas offering business security services, we wanted to take the time to offer practical fraud prevention tips for businesses. In this post, we’ll discuss ways to minimize your risk, from understanding common risks to utilizing treasury management tools and bank services to protect your business. Keep reading to learn more.
6 Types of Fraud All Businesses Should Be Aware Of
The first step in fraud protection for businesses is awareness—of the kinds of fraud your business may face, and the many forms it may take. Let’s look at the top business fraud threats.
1. Check Fraud
Check fraud is on the rise, and an important type of fraud for businesses to understand. Check fraud refers to any deceptive means of writing checks or altering them. Some kinds of check fraud to watch out for include:
- Check altering: Criminals, often using chemical solvents (called “check washing”), erase and change the name of the original recipient or alter the dollar amount.
- Counterfeit and forged checks: Criminals write false checks (from real, stolen accounts or fake accounts) and pass them off as legitimate.
- Closed account fraud: Checks are written against accounts that have already been closed—often when a criminal gets ahold of an old checkbook. Because it can take several days for a check to clear, businesses cashing these checks may not realize it until it’s too late.
2. ACH Fraud
ACH payments are a common type of EFT (Electronic Funds Transfer) where money is transferred from one checking account to another electronically. ACH fraud, essentially a digital form of check fraud, is when criminals obtain a routing number and account number (often from a valid check), then initiate an ACH debit on a business’s accounts. Because businesses only have 24 hours to report ACH fraud to financial institutions, it’s very important to check balances and transactions daily.
3. Payroll Fraud
Payroll fraud occurs internally when an individual exploits a business’s payroll system to steal money from their accounts. This may involve submitting false timesheets, issuing unauthorized bonuses, or sending money to fake employees. It can be a type of ACH fraud but can also happen to businesses who don’t use direct deposit payroll as well. Payroll fraud is often committed internally, but hackers may also access systems in order to initiate fraudulent payments.
4. Revenue Skimming
A common internal form of financial fraud, this may occur when employees pocket cash during sales transactions and inaccurately report the transaction in systems. Revenue skimming isn’t limited to retail establishments, however. It can occur whenever cash payments are accepted and all or some of the payment is stolen before it officially enters a business’s accounting records.
5. Ransomware Attacks
With a ransomware attack, scammers gain access to accounts, data, networks and internal systems, or devices, locking businesses out until a ransom is paid—though oftentimes, paying the ransom doesn’t restore access, either. This often happens when an employee accidentally downloads malware (malicious software) disguised as a legitimate file, either from an email attachment, website, or thumb drive.
6. Phishing Attacks
Posing as a legitimate vendor, potential client, government agency, or bank/financial institution employee, scammers will reach out to an organization via email, requesting payment of overdue funds, wire transfers, credit card numbers, or other business information. Because these emails can be exceptionally convincing, employees who receive them may be tricked into giving away sensitive data, downloading malware, or providing login credentials to scammers on fake websites.
Strategies to Help Prevent Fraud Happening to Your Business
Scammers’ techniques evolve continuously, and it may seem impossible to stay on top of all the ways in which criminals can defraud your business. But there are some best practices that you can follow that stand the test of time and can effectively reduce both your exposure to fraud and its impact—should you fall victim.
Keep up with Employee Education
Annual trainings for all employees that serve to introduce them to the latest fraud trends and give them the knowledge and tools to avoid falling victim are essential for all businesses. And you don’t have to create these trainings yourself—there are many services available to help businesses implement them, as well as free resources from local and national agencies. Common topics included in fraud-prevention training include identifying phishing emails, using VPN and secure, password-protected internet connections, and proper procedures for sending and receiving payments to and from vendors.
Hire Trusted People
Employee fraud is one of the most prevalent types of fraud that businesses face. While it may be hard to predict future behavior, be sure to thoroughly interview candidates, perform background checks, and contact professional references before bringing on new team members.
Closely Monitor Payments
Checking account statements every day is a great way to quickly respond to fraud, putting holds on unauthorized payments and alerting credit card companies and banks of fraudulent activity.
Many banks with business treasury services, including Moody Bank, also offer fraud alert services that alert you of suspicious or inaccurate payments on business credit cards, as well ACH fraud detection that allows you to verify checks presented against your account before they clear. Additionally, using secure encrypted systems to directly collect and deposit payments (like Moody Bank’s Autobooks invoicing service) can also reduce instances of check fraud while helping you better manage your business’s cash flow. For more information about Autobooks, check out our recent post, Is Autobooks Right for Your Business?
Obtain Good Insurance
Good insurance has always been a vital safeguard for businesses, but insurance that protects against fraud is getting increasingly important in today’s corporate world. Business liability insurance, crime insurance, cyber security insurance, and fidelity insurance offer varying levels of protection against fraud and cyber fraud, helping businesses recoup losses, as well as lost revenue. An insurance professional can help you select the right plan to adequately cover your risks.
Implement Internal Controls
From limiting physical access to safes and storage to creating software and system controls that determine how much access employees have to sensitive data and financial records, managing accessibility based on an employee’s role, requirements, and seniority can reduce fraud, while also increasing accountability and helping to discover the culprit or leak, should fraud occur.
Keep Internal Systems and Devices Up to Date
Because cyber criminals are always finding new ways to fleece businesses and consumers, one of the best and easiest ways to prevent digital fraud and cyber-attacks is to simply keep your technology current. Ensure that your business systems and devices are operating on the most recent versions of both security software and operating systems by simply approving updates as they are released. Is a program or device too old to be supported by its publisher or manufacturer? It’s time to replace it. Older tech will always have more vulnerabilities—keep yours up to date.
Help Protect Your Business from Fraud with Moody Bank
Working with a financial institution that prioritizes the security of its small business customers is one final way that you can protect your company from fraud.
At Moody Bank, our Treasury Management Services for Businesses incorporate numerous security measures, features, and protocols in order to provide your business with powerful tools to prevent fraud. From ACH fraud protection to Autobooks payment tracking, our Business Services can provide you with the latest technology to keep your accounts safe.
Looking for business checking accounts in Texas with robust security protections? Ready to easily track payments, invoices, and deposits? Call or visit a branch in Austin, Lake Jackson, New Braunfels, and throughout the Houston and Galveston region to learn more or sign up for Autobooks for Business.