How to Protect Your Business from Fraud

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The amount of fraud crossing the desks of treasury and security teams at Bank of Texas is staggering. One company wired thousands of dollars to a bogus account after receiving instructions from an unknown vendor; another had a six-figure check altered and cashed after it was stolen from a U.S. Postal Service mailbox. Fortunately, there are steps that businesses—alongside their banks—can take to combat fraud.

"The number of attempts is in the millions—that's just in one month," said Joseph Rangel, treasury management officer for Bank of Texas in Fort Worth. Companies need to be prepared for the inevitable because, at some point, a fraudster will try to steal their money.

Business Checks Are Being Stolen

The security experts at Bank of Texas report that most fraud comes from checks, often stolen from the postal system in transit. "The U.S. Postal Service continues to raise awareness about the number of items stolen out of the blue mailboxes and postal workers being robbed for their arrow keys, which unlock secure lockboxes," said Scott Edwards, director of fraud risk management at BOK Financial®, a Bank of Texas affiliate.

If businesses want to continue using check payments, they need to understand they can't rely on the bank to bail them out if fraudsters use counterfeit checks to drain their accounts. "There’s a shared responsibility," said Rangel. "The bank will investigate the fraud, but if the business didn’t proactively put protections in place, they’re at fault."

Proactive Protection Is Necessary

Rangel recommends that commercial clients take proactive steps to prevent fraud, including:

  • Implementing systems such as Positive Pay with payee name verification to add layers of protection for check and ACH payments. This service allows payments to be completed only if the amount and recipient have been identified in advance or confirmed by the bank.
  • Placing ACH debit blocks on accounts the company doesn't plan to use for transactions.
  • Separating duties to require two approvals on any money movement outside the bank to minimize internal fraud.
  • Reconciling accounts daily rather than monthly. Fraud must be caught and reported within a slim 24-hour window if a company hopes to recover stolen funds.

Companies that choose not to implement protections may be asked by their bank to sign an indemnification agreement, which protects the bank from risks or liabilities created by the company’s transactions.

Proactive Protection Is Necessary

Rangel stresses four steps companies should take to keep fraud at bay:

  • Use the fraud solutions offered by your bank.
  • Educate employees regularly.
  • Use separation of duties.
  • Monitor all transactions daily.

The team at Bank of Texas is available to discuss these topics and get to know your business. Learn more at www.BankofTexas.com/Commercial.