Author: Tiffany Binish Date: 12/04/2019

Steps to Avoid Account Fraud

Discovering that their bank account has been compromised is an unfortunate reality faced by small business owners every day. Hackers and fraudsters today have become fearless in their attempts to access account information. 

Bank fraud can happen to any business of any size. Recently, one of our customers mailed a check to a local vendor, and that vendor's mail was stolen from their mailbox. The check was washed and retyped to appear to be payroll. When a non-customer walked into our branch to cash the check, thanks to her gut instinct, our teller questioned the check's validity because of the different font type and information not lining up. We called the business owner to verify and found that the check was, indeed, fraudulent. 

Businesses can mitigate the risks and minimize loss by understanding the three most common types of business account fraud to look for – and by implementing prevention measures within their organizations.

1. Check Fraud

Check fraud often results in a significant financial loss. Once someone gains access to routing and account numbers, they can withdraw money in several ways:

  • Altered checks. These are valid, issued checks that are modified with different payment amounts or recipients.
  • Counterfeit checks are fake checks that are printed with a business's routing and account number.
  • Forged check signatures occur when stolen blank checks are written out by someone who is not authorized on the account.
  • Forged check endorsements happen when valid, issued checks are stolen and then endorsed by someone other than the payee.

2. Electronic (ACH) Fraud

Using the Automated Clearing House network for payroll, bills and vendor payments is more secure than paper checks, but electronic transactions aren't exempt from fraud. If bank account numbers are compromised, a fraudster can use them to try to initiate a transaction and pull funds from your business account.

3. Wire Fraud

When armed with a routing and account number, fraudsters may try to call a bank and request a wire transfer from your account. Posing as the CEO, for example, they send an email to the accounting department with wire instructions to pay a fake invoice. Because wire transfers are considered guaranteed funds, victims of wire fraud often have little recourse to recoup their losses. It's essential to make sure your employees are aware of the fraud schemes that are attempted and create a process for handling the situation if an email comes in that creates a sense of urgency to send a wire. You can also set up a Wire Agreement with your bank on who you want to be called to verify and approve wire requests. 

 

How to Prevent Business Account Fraud

Monitor Accounts Frequently

Business owners and managers should monitor the company's accounts daily to monitor for suspicious activity and limit exposure. Be aware of even small unknown withdrawals, since a fraudster may test the waters with a minor transaction first, then attempt to steal more substantial amounts. Your online banking should also offer real-time alerts that allow you to set how and when you receive notifications on your accounts either by text message or email. 

Use Preventative Tools

Many banks offer tools to help you prevent fraud from occurring:

  • Check Positive Pay is an automated service that matches check details against a list of previously authorized payments. 
  • ACH Positive Pay allows you to set up a list of authorized companies along with approved dollar amounts that can debit the account. 

Follow Proper Procedures

There are additional steps you can take to protect your business: 

  • Always protect your account information — keep company checks and account numbers in a secure place and implement safeguards like encrypted passwords and locked file cabinets.
  • Work with your banker. He or she can offer additional fraud prevention tips to help protect your finances.
  • Use a secure method of communication. When requesting a wire transfer, for example, sending your information via fax or secure email are recommended options.

It's important for small business owners to not only educate themselves but also to keep their employees involved with the accounting on the types, risks and ways to prevent bank fraud. If you suspect fraud, contact your bank immediately. Be prepared, as your accounts may need to be shut down and new ones opened to protect your funds and mitigate future risks. Investors Community Bank has knowledge and insights to help you avoid being taken advantage of – we encourage you to reach out to discuss steps to take to protect your business.

ICB Fraud Risk Assessment Tool

 

Topics: Risk/Fraud, General Business, Nonprofit

 

Written by Tiffany Binish

Tiffany Binish is a Cash Management Specialist for Investors Community Bank. She collaborates with business partners to customize deposit solutions and introduces the products and services that can increase their business efficiencies and proactively protect against fraud. She holds a bachelor’s degree in business from UW Green Bay, is a graduate of the UW Madison Graduate School of Banking and has more than 14 years of banking experience.

 

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Views provided in this blog are general in nature for your consideration and are not legal, tax, or investment advice. Investors Community Bank (ICB) makes no warranties as to accuracy or completeness of information, including but not limited to information provided by third parties, does not endorse any non-ICB companies, products, or services described here, and takes no liability for your use of this information. Information and suggestions regarding business risk management and safeguards do not necessarily represent ICB’s business practices or experience. Please contact your own legal, tax, or financial advisors regarding your specific business needs before taking any action based upon this information.