Commentary: Guarding Your Business From Fraud

In today’s digital age, surging fraudulent activities pose growing threats to small businesses. Owners are compelled to safeguard their financial assets and sensitive data by establishing robust internal controls and leverage available services. Small businesses benefit most from tailored strategies, like establishing formal policies, secure processes, and ongoing employee training. These specific tools and practical measures are crucial for small business owners and employees to proactively reduce the risk of fraud. This comprehensive guide explores how small businesses can fortify their defenses against a constantly evolving landscape of fraud and scams.

Establishment of formal policies and procedures
Formal policies and procedures are foundational for effective fraud prevention. Small businesses, often constrained by resources, must prioritize creating resilient internal frameworks to hedge against these threats.

Since most communication happens online, it is vital to double-check payment information received via email. The rise of phishing scams highlights the importance of taking proactive steps, such as directly confirming payment details with the person over the phone.

Secure processes and time frame understanding
It is important to have secure procedures when updating vendor information to prevent fraud. Fraudsters exploit vulnerabilities in vendor data, redirecting payments to unauthorized accounts through unauthorized transactions. Equipping employees with tools to follow established protocols, conduct safe online practices, protect user data, and recognize fraud attempts is vital in this context. Be sure you and your employees understand that unauthorized transaction recovery time frames require timely action. Per National Automated Clearing House Association (NACHA) and the Office of the Comptroller of Currency (OCC) regulations, unauthorized ACH debits must be reported within 48 hours. Suspicious checks must also be reported within 24 hours to guarantee recovery of funds.

Human element and integration with training
Emphasizing direct verification of payment information over the phone highlights the significance of the human element in fraud prevention. While technology plays a vital role, human intuition and direct communication add an extra layer of security. Integrating these measures into ongoing employee training programs creates a culture of awareness and responsibility, actively involving every team member in the fraud prevention strategy. Employees become active contributors to the business’s resilience against potential threats, ensuring that each team member is well-versed in the evolving landscape of fraud prevention.

Tools for small business owners and employees
To empower small businesses in their fight against fraud, owners and employees can utilize a range of practical tools. Regularly monitoring accounts through online and mobile banking provides real-time insights into financial transactions. Distributing paper or electronic statements to multiple employees for review ensures a collective vigilance against potential discrepancies.

Account alerts are another invaluable tool for fraud prevention. Business owners can be promptly notified of suspicious activities and when balance thresholds are reached. They also come in handy for tracking processed payments and cleared transactions—all allowing for a more proactive response. Additionally, small businesses can further strengthen their defenses by signing up for positive pay services. Financial institutions use positive pay because it verifies issued checks, notifies businesses of any discrepancies, whitelists approved companies for ACH use and send alerts for any debits from unapproved entities.

Conclusion
To navigate the changing landscape of fraud, businesses must adopt a more proactive approach towards prevention. Whether it is systematically verifying payment instructions, securing vendor information changes, or emphasizing the human element in fraud prevention, each aspect contributes to laying a solid foundation for protecting financial assets. With a comprehensive strategy, businesses can confidently navigate the digital age, minimizing the risks of fraudulent activities and ensuring the protection of their financial well-being.

For additional information, please visit: Business Fraud Prevention

About Kyle Guest
Kyle Guest, vice president of business services at Mountain America, joined the credit union in 2021. He has been in the financial industry for over 17 years, specializing in commercial relationship management and cash management products. He is passionate about enhancing Mountain America's business technology services and strives to improve the daily banking processes of all our business members, creating an exceptional experience with Mountain America.

Kyle currently resides in South Jordan with his wife, Megan, and their four children.