In today’s world, no size company is immune from fraud attempts. Whether it is a cybercrime, employee theft, or payment fraud, all organizations must be aware of potential threats to their company’s financial well-being. Investigating fraud is time-consuming and expensive. Once fraud is discovered, it’s necessary to investigate the situation to determine who was involved, how the fraud occurred, and how much money was lost. Preventing fraud is far less expensive. Most companies will recover only 25% or less of the funds stolen, so it makes sense to implement measures to prevent potential fraud attempts.

At NexTier, protecting our customer’s financial information is our highest priority. The following checklist can help you and your organization become familiar with different business fraud attempts and fraud prevention for businesses. This checklist will provide suggestions to help protect your organization from the loss of time and money due to fraud.

Cyber Crime

Phishing schemes involving fraudulent emails are being sent that can infect recipients’ computers with malware and allow access to their bank accounts. These criminals will attempt to steal your financial information by sending emails disguised as reputable organizations to get you to click on a link or respond with personal information. The FBI (Federal Bureau of Investigation) suggests the following ways to protect your bank accounts.

  • No legitimate financial institution or regulatory agency contacts consumers requesting information or asking you to go to a website and confirm information. You should not open attachments or reply to these kinds of requests. Contact your bank or financial institution directly to confirm a problem with your account or one of your recent transactions.
  • Be certain that your computer’s anti-virus software is up to date.
  • Never accept unsolicited jobs online that require you to receive funds from numerous bank accounts and then wire the money to overseas accounts — sending funds overseas could prompt a criminal investigation.

Employee Theft

Unfortunately, financial institutions have seen an increase in internal fraud throughout all sizes of organizations and industries. Small businesses are not immune to employee theft and fraud and, in some ways, may be more vulnerable than larger companies. The trusting, familial characteristics that make a small business a pleasant workplace and the lack of dual control can contribute to an environment conducive to fraud. Here are a few tips to protect yourself from employee theft.

  • Hire the Right Employees. Screen potential employees thoroughly, checking past employment, personal and professional references, and criminal records. This is especially important if the person will handle cash or inventory.
  • Separate Accounting Duties. Many businesses depend on one person to open mail, process payments, make bank deposits, pay invoices, handle petty cash, and reconcile bank statements. This unrestricted access makes a business vulnerable.
  • Arrange For Surprise Audits. Catching an employee off-guard can be your best defense in discovering fraud. Make it a regular practice to bring in a CPA once a year, at different times, to conduct a surprise audit of your company’s financial records. This makes it difficult for dishonest employees to cover up their actions. In addition to uncovering fraud, the knowledge that the company conducts surprise audits can act as a deterrent.
  • Always do bank statement reconciliation at least once a month and review bank statements before your bookkeeper does. Be on the lookout for missing checks, checks that are out of order, checks written to suppliers or people you don’t know, and checks made out to a third party but are endorsed by someone in your company.
  • Create A No-Tolerance Culture. Set appropriate ethical examples for employees to follow and treat workers fairly and with respect. But don’t be too trusting — remember that personal financial pressures can push even the most trusted employees to commit fraud.
  • Insist That All Employees Take Allotted Vacation Time. Research has shown that employees committing fraud sometimes resist taking a vacation because they must remain on the job to cover up their fraudulent activity.
  • Establish Dual Control. Utilize Cash Manager to set up notifications when balances fall below certain levels. In addition, establish a second user to “approve” ACH or Wire transactions before the file is released to the bank.
  • Require that two signatures be required on all issued checks.
  • Review corporate credit card statements periodically for unauthorized cash advances or transactions.
  • Remove terminated and former employees from corporate credit cards, signature cards, and NexTier Cash Manager access.
  • Turn off your computer when you are away from your desk.

Payment Fraud

Payment fraud continues to be a major issue for businesses and banks alike. With the automation of check processing and the availability of high-quality color printers, check alteration and recreation have cost customers and banks billions of dollars each year. Here’s how you can protect your business from payment fraud:

  • Again, reconcile your bank account monthly and take advantage of eStatements.
  • Use NexTier Cash Manager to review your daily activity. The bank has 24 hours to return a check for any reason.
  • Use Positive Pay. NexTier Cash Manager customers can utilize Positive Pay, a check matching program that eliminates checks clearing for the wrong amount. With Positive Pay, the customer sends NexTier their issued check file, and all incoming clearing checks are matched against that list. If they do not match, they are sent to the customer through Cash Manager for a decision on whether or not to pay the item. The check can then be returned, avoiding potential fraud and a lengthy investigation.
  • Use Electronic Payment Authorization (EPA). NexTier also offers ACH blocks and filters, referred to as EPA. With EPA, NexTier can block all ACH debits or credits from specified accounts. NexTier can also filter ACH transactions only to allow those authorized by the customer.

Our Treasury Management team can give you more information on which NexTier solutions are best for your organization. Contact a member of our team today to learn more.