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How to minimize your payment fraud

It seems almost inevitable that payment fraud will keep on growing, but it doesn’t have to. Corporate treasury departments and all departments have to be vigilent and use latest techniques and technologies.

AFP 2108 Payments Fraud and Control Survey

In January this year AFP Surveyed 420 corporate members, which ranged from $50 million annual turnover to over $20 billion, and found that:

  • 78% had experienced attempted or actual payment fraud
  • 65% of payment fraud activity continues to originate from outside individuals via forged cheques and stolen cards
  • At 67% of organisations, Treasury staff discovered the fraud and at 41% of organisations penance and accounts payable staff also played an important role in identifying fraud
  • Business Email Compromise (sophisticated scam targeting businesses working with foreign suppliers and/or businesses which regularly perform wire transfer payments): FBI analysis showed $5 billion US being in the period Octber 2013- December 2016 - lost by  this type of fraud. Although the rate of BEC is starting to fall.

At the same time as cheque usage is declining, real-time payments are increasing rapidly which are much more difficult to stop. Also non-bank payment solutions are increasing. New processes and technologies are needed. 

Payment fraud prevention processes and technologies

Over the last year some important new fraud prevention processes and technologies have emerged:

  • Kyriba’s Real-time Payments Fraud Detection module detects fraud and non-compliant payment activity checking each payment against specified scenarios and flags non-compliant payments in real-time. The fraud detection module enables users to set pre-defined detection rules (scenarios) to screen for suspicious payments requiring further attention, see 
  • NetReveal® Enterprise Payment Fraud, from BAE Systems, spots critical payment systems fraud, using robust behavioural profiling, anomaly detection and machine learning analytics
  • Technologies such as artificial intelligence and machine learning are moving beyond academic theory and beginning to support initiatives such as the fight against financial crimes, e.g. purchase card usage is being automatically analyzed, and when an irregularity is detected it would auto-assign it to key personnel for action through workflows and case management functions.

But the basics of fraud in which your biggest sources come from your staff and frenemies, see, and the fraud prevention disciplins remain the same. The corporate treasury department needing to fight fraud at different levels:

  • clear description of the overall fraud control policies and how the operational and internal controls within the department and in regional or subsidiary treasuries operate
  • payment authority levels for each member of staff
  • dual approval for types of payment
  • full documentation of all working procedures defining the sequences of actions required to perform each task, the information required and how it flows in the department, and what is recorded, reported and monitored
  • full segregation of duties and processes between front, middle and back office or at least segregation between execution, confirmation and settlement
  • segregation of accounts and monitoring and reconciling of accounts daily
  • full automation of key processes so there is no room for manual intervention and fraud
  • full treasury management information on each transactions to ensure any fraud is exposed
  • performance targets that do not encourage fraud
  • a clear definition of who is responsible for the control framework
  • personnel policy that has forced vacations and job rotations
  • regular and comprehensive audits of the whole corporate treasury department operation.

Good Habits and Practices

At a much more mundane level, but just as important, it is vital to ensure that basic day-to-day good practices are followed such as not giving passwords and personal information over the phone, and changing passwords regularly. Also looking out for employees who fail to take annual leave, or who work long hours and are reluctant to delegate or share responsibilities, or who have a change in lifestyle - an surprisingly expensive new car, or have a passion for gambling or other expensive habits.


CTMfile take: It is not inevitable that payment fraud keeps on growing. Using these techniques and technologies will reduce your level of fraud.


This item appears in the following sections:
Fraud Prevention
Minimizing Payment Fraud

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