In today’s digital age, fraud is an ever-present threat to businesses of all sizes. In addition to financial losses, fraud can lead to reputational damage, regulatory fines and legal consequences, and operational disruption. 

Unfortunately, it’s no longer a matter of “if” you’ll be affected by fraud, but “when.” According to the 2024 AFP Payments Fraud and Control Survey Report, 80% of organizations were victims of payments fraud attacks or attempted attacks in 2023, which is an astounding 15% increase from the previous year. This spans all types of businesses, from large corporations to small nonprofits, underscoring the necessity for every business to implement comprehensive fraud protection strategies.

Banks employ a variety of robust protections to fight fraud, but businesses must also invest in their own anti-fraud efforts. This dual approach is essential because vulnerabilities unique to the business’s operations can still pose significant risks that banks’ measures alone cannot fully mitigate. 

Automate electronic payments 

Check fraud affected 65% of surveyed businesses in 2023. The U.S. Postal Service has become a common target for check fraud with checks being intercepted and altered by fraudsters and then deposited via mobile apps or cashed by unsuspecting bank employees. If you can switch from checks to electronic payments, here are a couple options: 

  • Automated Clearing House (ACH):  is a way to electronically move money between banks. 
  • Automated Account Payable solutions: Leveraging a payment app, such as Finrails AP from Signature Bank, offering one central, secure platform where authorized users can securely manage and monitor payments of all types, including virtual card payments to reduce the use of paper checks. 

If you must use checks, ensure they are traceable. Positive Pay is a service offered by banks, which flags and reports suspicious checks before they are paid. It is alarmingly underused by businesses, thinking they have the same fraud protections as consumers, which they do not. 

Enhance digital controls 

Fraud is often a result of employees or customers sending sensitive information through unsecured channels. Ensure payments and information are secure by using digital controls such as:

  • Strong passwords and secure links: Ensure that sensitive information is sent securely and passwords are strong and frequently updated
  • Encryption: converting data into a secure format and ensuring it remains encrypted during transmission to prevent unauthorized access  
  • Multi-factor authentication and dual controls: requiring two forms of authentication, such as a password and a one-time code sent to an email or mobile device (yes, this can be annoying, but it’s effective) 
  • Biometric authentication: using biological traits, such as fingerprints or facial recognition, to verify identity 

Leverage real-time monitoring and alerts

Real-time monitoring systems can track transactions and other activities as they happen, flagging suspicious behavior immediately. These systems often use predefined rules and machine learning models to evaluate the legitimacy of each transaction. When potential fraud is detected, automated alerts are sent to the relevant personnel, enabling a quick response to mitigate any potential damage.

Educate employees 

While technology and data play a critical role in fraud prevention, human awareness remains vital. Educating staff on the latest fraud tactics and the importance of adhering to security protocols can significantly reduce the risk of insider fraud and phishing attacks. Employees should be on the lookout for fraudulent behavior and know what to do if they spot potential fraud. 

When fraud occurs, prompt action is critical. When unauthorized transactions happen, an organization’s bank should be notified immediately because liability shifts to the business after just 24 hours. This will also help prevent further fraudulent transactions.

Technology is essential for businesses to protect themselves from fraud threats 

Fraud poses a significant financial threat that businesses must proactively address. By implementing multiple layers of protection—ranging from enhanced cybersecurity and employee education to digital payment solutions and vigilant monitoring—businesses can significantly reduce their vulnerability to fraud. Preparing for the inevitability of fraud with a robust prevention plan is essential to safeguarding your business’s financial health and integrity.

About Signature Bank 

Signature Bank is Chicago’s business bank, focused exclusively on serving the needs of privately owned businesses and their owners. If you’re looking to partner with a relationship-driven bank in the fight against fraud, visit Signature Bank online at www.signaturebank.bank or contact Jason Chess at jchess@signaturebank.bank or (847) 268-1032.