Has your organization been hit by payments fraud? If not, you’re one of the lucky few. The Association for Financial Professionals (AFP), in their 2016 AFP Payments Fraud and Control Survey, found that 73 percent of organizations experienced attempted or actual payments fraud, up from 62 percent in 2014. If you haven’t been a target yet, you soon could be. Use this information to take action now to protect your organization in the future.
Organization Size Doesn’t Matter
Interestingly, the AFP research shows that 71 percent of organizations with annual revenue less than $1 billion were fraud targets. That percentage increased to 78 percent for organizations that have over $1 billion in revenue with fewer than 26 payment accounts, and dropped significantly to 64 percent for organizations with over $1 billion in revenue and more than 100 payment accounts.
The message here is that unless you’re running a large, complex organization, your small organization is just as likely to be a target for fraud.
Checks Are the Payment Method of Choice for Fraud Attacks
Again this year, the AFP study found that fraudsters most frequently attempt or succeed at check fraud. Part of this result is because checks are still used for a large number of business-to-business (B2B) payment transactions. In addition, criminals are familiar with checks. They’ve devoted a great deal of time and energy figuring out how to commit fraud in a paper check environment.
Business Email Compromise (BEC) Using Wire Transfers Is a Growing Fraud Strategy
Of all the automated payment methods, including wire transfers, corporate credit cards, and ACH debits and credits, wire transfers are being hit hardest by fraud attempts. It was a problem according to last year’s AFP study (2014 figures), and the disappointing fact is that it was on the rise again in 2015. The results imply that BEC is the main tool used by fraudsters to get their ill-gotten gains.
BEC scams center around the criminal studying emails written by high-level executives, such as a Chief Financial Officer. The criminals study how the executive communicates down to the type of phrases they use. Then the criminals strike, normally when the executive is out of town.
They send an email to an employee requesting that they process an immediate wire transfer to the vendor identified in the email. They often include a purpose for the payment that makes sense within the organization’s operation.
The reason this is so effective is that the wire transfer takes place immediately and it’s very difficult to reverse. At a time when the “sender” is out of town and not easily accessible to verify, this scam often works.
What’s the Best Way to Protect Your Organization?
Automating your AP Operations to include payment processing can help you sidestep the criminals. You can eliminate paper processing and automate the entire AP process.
In addition, automated matching of invoice and purchase documents ensures accurate verification, providing another way to avoid fraudulent activity. The system will automatically match invoices with purchase orders. If no match is found, the system will route the invoice to the associated department head for verification. Incorporate wire transfer requests into the accounts payable process to close the BEC loophole, or require that management make emergency requests via telephone.
Senior management review before payment authorization needs to be quick and easy to encourage management to review authorizations carefully, even when they’re busy or out of the office. With an automated system, management isn’t faced with a tall stack of invoices, and they can perform the authorization from their office or mobile device.
Going a step further, automated payment systems can eliminate exposure from paper checks almost entirely!
All of these streamlined systems contribute to avoiding payments fraud. If you’re concerned about protecting your organization, the experts at ACOM offer payment automation to complete the AP cycle. Contact us at 800-699-5758, or online.