Unfortunately for many businesses, they are all too familiar with the damaging effects fraud can have on their organization. In a 2009 survey conducted by the American Banking Association, it was estimated that industry check-related losses amounted to approximately $1.024 billion. Additionally, a 2010 survey conducted by The Association for Financial Professionals (AFP) reported that 90% of respondents to the survey were victims of check fraud, with 64% suffering financial loss as a result.
It becomes all-too important to take the steps necessary to safeguard you and your business against fraudulent activities that can strike without warning. Increasingly, as we all navigate the recent financial crisis, cost savings has becomes a paramount concern for many enterprises. I would caution many businesses, however, from cutting costs in areas that can have a potentially devastating impact. While many businesses, for example, may complain about high insurance premiums, I would guess that very few would elect to forgo property insurance all together. Thinking in these terms, many businesses should begin to see that fraud protection services provided by their financial institution may be a wise investment given their relatively nominal cost.
There are several simple ways that businesses can safeguard themselves from payment related fraud. Positive Pay, for example, is a tool that compares an organization's check record with those presented for payment or payee names for possible alteration. The lists that are provided to the bank by the customer are then compared to checks that are presented for payment. Any check that doesn't match is flagged for a pay or return decision.
With respect to ACH payments, companies can use debit block and filters to prevent unauthorized transactions.
Single Use Accounts is another way in which companies are safeguarding their credit card information. Single Use Accounts utilize a one-time generated credit card number that is presented to a vendor or merchant for payment. Once the payment is made, the credit card number is no longer valid thereby virtually eliminating the risk that the number is taken down and used maliciously by an unauthorized user.
Aside from bank products, companies can take simple steps within their organization to help reduce the risk of fraudulent activities. Internal control processes such as daily reconciliation and separation of duties, are effective measures especially in concert with similar sound practices by the organization's financial institution.
While it may seem counter-intuitive, the use of online banking platforms may actually increase the security for many organizations as many modern banking systems have sophisticated user entitlement options that can be used to dictate transactional limits, approval authorities, and account viewing privileges. While many believe that online banking presents a new set of risks, online banking in general is very safe. Most banks use high-end encryption, such as 128-bit which is so powerful that the U.S. government currently does not allow the sale of it overseas. Stealing information that is 128-bit encrypted is virtually impossible, however, what you should pay attention to is what is happening while you are online. Depending on the browser you use, you'll either see a closed padlock icon or a key icon in the lower right or left corner of your browser. When you see these, you'll know that your transaction is being encrypted. Additionally, many sophisticated commercial banking online platforms will use secure tokens that allow for the user to input a pin that changes every 30-60 seconds, which is used in conjunction with a unique username and password.
In summary, businesses are wise to consider looking more closely at implementing fraud protection services and more stringent internal controls. The extra time and cost associated with these activities are far outweighed by the potential benefit these activities bring. Not only is fraud growing at a record pace, but the people carrying out these acts are getting more sophisticated in their methods. Businesses can keep themselves safe by staying informed and alert to potential threats. Talking with your financial professional about your concerns is a first step to fighting back.
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