The Bad News and The Good News on Payment Fraud
Written by Alton Multhauf, Vice President - Treasury Management
Payment fraud has been at the forefront of people’s minds due to the many publicized fraud stories in the news. According to the most recent Association of Financial Professionals poll, 73% of organizations experienced attempted and/or actual fraud. Which leads to the question, “What can I do to protect my information and keep my money safe?”
There’s a common misconception that the Federal Deposit Insurance Corporation (FDIC) protects deposits against principal loss when fraud occurs, but that’s not the case. The FDIC protects against deposit principal loss in case of a bank failure. The FDIC was created by the 1933 Banking Act to restore the public trust in the banking system after the Great Depression, and shows the importance of understanding the strength of the financial institution you choose to work with.
There have always been criminals trying to steal from bank accounts, but you don’t see bank robbers running through the front doors with pin stripe suits and tommy guns anymore.
Nowadays the criminals are hackers all across the world, working to gather information and initiating fraudulent transactions.
The bad news: Your personal or business account information is on the bottom of every check you write, and is handled by multiple people throughout the check’s journey.
The good news: There are practices and bank solutions to help prevent fraud.
Businesses and nonprofits do not have the same luxury of individual consumer protection laws. If a fraudulent transaction clears your business’s account, depending on the type of transaction, you may have as little as 24 hours to report the transaction!
Below are two fraud tools offered by First Business. Everyone should consider using these as proactive measures to protect their business accounts rather than going through the panicked fire drill when a fraud case appears.
ACH Positive Pay
This service monitors for unauthorized Automated Clearing House (ACH) transactions. With your assistance, we create a list of preapproved vendors who can debit your account and at what dollar amount limit. You’re then notified if an unknown organization is trying to pull money from your account, which you can decide to pay or return. This is an automated service that requires little to no time on a day–to-day basis, but blocks and requires action when potential fraud occurs.
Payee Positive Pay
This battles check fraud in a very straightforward way. When you initiate a batch of checks, upload the file from your accounting software into internet banking. As the checks clear, the information is matched to the uploaded file. If a check has altered information or is not included in the uploaded information, it’s flagged for you to make a decision before it clears your account.
I recommend businesses take advantage of these tools, and also keep an eye on your account activity, keep a separation of duties within your office, and, when necessary, implement dual control for outgoing transactions.