Fraud Prevention at a Glance: Download Our Guide
Fraudsters continue to target vulnerable businesses. The 2018 Association of Certified Fraud Examiners (ACFE) report, found that companies with less than 100 employees lost nearly twice as much money to fraud than businesses with 100+ employees. Smaller companies might have fewer resources to prevent these attempts, but with median losses of $200,000 per scheme, they can no longer afford to sit back and hope for the best.
Two categories account for 51 percent of the fraudulent losses to small businesses and both are related to internal theft: 1) billing and 2) check or payment tampering.
ACFE Glossary of Terminology
Billing scheme: A fraudulent disbursement scheme in which a person causes his or her employer to issue a payment by submitting invoices for fictitious goods or services, inflated invoices, or invoices for personal purchases (e.g., employee creates a shell company and bills employer for services not actually rendered; employee purchases personal items and submits an invoice to employer for payment)
Check or payment tampering scheme: A fraudulent disbursement scheme in which a person steals his or her employer’s funds by intercepting, forging, or altering a check or electronic payment drawn on one of the organization’s bank accounts (e.g., employee steals blank company checks and makes them out to himself or herself or an accomplice; employee re-routes an outgoing electronic payment to a vendor to be deposited into his or her own bank account)
Fortunately, businesses can take steps to reduce the risk of losing funds in these schemes. Here are four business fraud prevention measures to keep your profits out of the hands of thieves and in your bank account.
1. Leave no white space.
Extra spacing on company checks creates a forging opportunity for both strangers and employees. Adding an extra zero to the dollar amount or altering the name of the payee is less challenging when there’s room to alter the check. Fill out all fields on business checks. Write in larger script if necessary.
2. Separate functions.
Help reduce employee check fraud by implementing internal controls that place limitations on the handling of incoming and outgoing checks. For example, avoid having the same employee issuing, signing, and distributing paychecks. Instead, have one employee responsible for payroll and another for check distribution.
3. Change mail processing.
Criminals look for routines. When they see outgoing vendor payments or checks sitting in the tray at the reception desk by 10:00 AM each day, they see an opportunity. Thieves only need one check to start their fraud scheme. Once they leave your office with a company check, they can use advanced computer imaging to scan, duplicate, and print brand new counterfeit versions on blank check stock. Assisted by sophisticated software, they can quickly gather vital information, such as signatures, a company logo, account number, and routing number. All they need is a willing partner with a valid ID to cash in on this fake check scheme.
Never leave outgoing mail sitting in plain sight. The United States Postal Service (USPS) recommends that sensitive mail be placed in a blue USPS mailbox, locked letter slots, or handed directly to a mail carrier.
4. Train your staff.
Businesses can also be on the receiving end of a fake check scam. Counterfeit checks can make their way to your accounting department and into your business bank account before discovering that a customer paid with a phony check. Make sure your staff examines each check for telltale counterfeit signs that include fading, no perforated edges, and missing check numbers. Business checks should include account numbers on them.
Traditions Bank believes that fighting fraud is everyone’s business. We can help you prevent fraud with ACH and Check Positive Pay. Protect your business when you use these services to validate ACH transactions and issued checks. Taking these extra steps to ensure your account is protected can mitigate potential losses caused by fraudulent activity.
Would you like to learn more? Please contact Elizabeth Dellinger, Director of Treasury Management, at 717-747-2638 or edellinger@traditions.bank.