Avoiding fraud

When it comes to handling a
company’s cash, the umbrella
term used in the banking industry is “treasury management.” Simply
put, treasury management is the management of all cash-related functions in
a company. Terri Crane, assistant vice
president at Fifth Third Bank in
Cincinnati, says that this includes cash
management, risk management, dividend disbursements and insurance.

Cash management is an area which
any firm must carefully monitor to be
sure they get the most from their
banking relationship and to avoid the
possibility of fraud.

Smart Business spoke with Crane
about ways to maximize an organization’s protection against fraud.

Describe some common fraud vulnerabilities facing companies.

There are two common types of
fraud: check fraud and electronic
fraud via ACH (Automated Clearing
House). Companies are susceptible to
check fraud every time they send a
check. The account number is printed
in the MICR (magnetic ink character
recognition) line of a check. Check
fraud has become very simple. Buying
check stock at any office supply store,
printing the company logo and reproducing a MICR line can be easily done
on any home computer.

Another form of fraud that companies face today is ACH fraud. The
waive of electronic bill pay and electronic debit has made it easy for a
criminal to provide a stolen account
number to a company for payment.

Once exposed to fraud, how should the
company proceed?

Once exposed to check fraud a company must notify the bank within 24 hours. The bank has only a small window of time (24 hours) to attempt a
return on a potentially fraudulent
item. After the window is closed, it is
considered a late return and a loss
may occur. ACH fraud has variable
time rules depending on the type of
ACH that hits the company’s account.
The company must notify the bank, in
some cases within 24 hours, of the
debit posting. In both cases, the potential loss can be avoided by utilizing
bank fraud prevention services.

How can a company minimize fraud?

Internally, a company should ensure
protective measures are in place.
These would include practices like
dual signing of checks, separation of
duties, daily review of checking
accounts activity, keeping check stock
locked and use of checks with built-in
security features.

What is the bank’s role in assisting with
treasury-related functions?

Our goal at Fifth Third is to provide
products and services that help companies manage their cash as effectively as possible and aid them in achieving their overall strategic objectives.

What are the best ways banks can help protect organizations?

Positive Pay is the best way to protect a company against check fraud.
Companies can perform the audit
review on their end by reviewing all
checks clearing daily or provide a disbursement file to the bank and let the
bank do the necessary review. Either
method can be very effective against
check fraud.

To protect a company against ACH
fraud, banks can place an all-debit
block on accounts that should have
no ACH activity. For accounts that
require taxes, payroll or other preauthorized debits coming out, an ACH
filter can be placed on the account. By
using a company ID, the filter works
like a gate; the company tells the bank
what IDs are allowed in and what IDs
are not.

TERRI CRANE is assistant vice president at Fifth Third Bank in Cincinnati, specializing in treasury management. Reach her at
[email protected].