How businesses can protect against fraud with treasury management

Kacy Karl Owsley, senior vice president, treasury management sales manager, Cadence Bank

Kacy Karl Owsley, senior vice president, treasury management sales manager, Cadence Bank

Business owners have exposure to financial fraud for all payment methods.

In 2011, 66 percent of businesses faced attempted fraud, according to a survey by the Association for Financial Professionals. Although three-quarters didn’t have losses, the remainder had an average loss of $19,200, which can be devastating to small or middle market companies.

“This tells us that business clients in particular need to take measures to prevent fraud — whether it’s internal or external,” says Kacy Karl Owsley, senior vice president and treasury management sales manager at Cadence Bank. “Businesses should work with a financial institution that can offer solutions and best practice recommendations to help them mitigate theft.”

Smart Business spoke with Owsley about fraud risks and preventative measures businesses can take to avoid being a victim.

Describe today’s fraud landscape?

Sophisticated database technology, online information exchange and mobile access devices make payment fraud a global issue that can be completed anywhere. Checks, despite their declining use, continue to be the leading target for paper and electronic fraud, primarily because each contains relevant financial information — account and routing numbers.

A business only has 24 hours to dispute an electronic transaction after the debit hits its account or funds might not be recovered. Fraud often is directed at business accounts for the larger available balances and transaction volume.

What solutions can banks provide?

Among the products banks offer to protect accounts from electronic or paper fraud is business online banking, which allows accounts to be viewed daily to ensure only intended debit and credit transactions are made.

Positive pay operates as a fraud prevention system, allowing businesses to export check registers so the bank can match checks through an item-processing network or at the teller line. If there’s a problem, the bank alerts the business, usually via mobile device, and the employer decides to pay or return the item.

Automated Clearing House (ACH) positive pay or block works much the same way to prevent electronic fraud. Business owners can set up approved vendors that are automatically paid, as well as maximum dollar filters. Other transactions generate an alert, so employers can make a quick decision within the 24-hour window.

Businesses can utilize credit cards to eliminate sharing bank account information. Cards have cash rebates and point systems, and allow for integration to post to an accounting system.

Through lockbox services, businesses can accept payments directly at their bank rather than at their business location. Banks can manage payment processing, data entry and deposit preparation, and help prevent internal fraud by segregating these duties.

Finally, with account reconciliation services, banks assist in payment reconciliation to ensure timeliness and swift detection of suspicious activity.

What internal controls or preventative measures should a business implement?

A bank’s treasury management team can consult with clients on financial transaction best practices. Some suggestions are:

• Separation of duties for those creating versus signing checks.

• Having a dual control process for vendor acceptance or setup, as well as any financial transactions.

• Ensuring financial transactions are done on a dedicated computer.

• Downloading a software application like Trusteer Rapport™, which many financial institutions offer free of charge. It’s an additional layer of malware or anti-virus monitoring that notifies the bank and business when a PC downloads a virus. And the bank can instantly disable the user login.

• Knowing your employees by doing background checks, and pursuing any unusual behaviors or transactions.

• Setting up tight policies around email and Internet usage. Also, keeping anti-virus software up to date.

• Hiring an external firm to run a mock attack to test anti-fraud measures to ensure they cannot easily be broken.

• Conducting an annual audit, review or compilation.

Kacy Karl Owsley is a senior vice president and treasury management sales manager at Cadence Bank. Reach her at (713) 871-3917 or [email protected]

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