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 firstname.lastname@example.org.