Webinar recap: Proactive steps can help prevent payment fraud

All businesses are exposed to the risk of payment fraud, but not all businesses are doing what they can to protect themselves.

"Fraudsters are experts at finding vulnerabilities and exposing them," said Kevin Meabon, EVP and Regional Middle Market Bank Director at Umpqua. 

Umpqua Bank has set out to raise awareness and help businesses protect themselves with its Success Against Fraud Events. The most recent event was the Proactive Payments Protection webinar, in which a panel of experts dove into the latest trends in payments fraud and suggested steps businesses can take to protect themselves.

Kevin was on the panel, along with other Umpqua experts: Mike McKean, Treasury Solutions Director; Jon Stockton, SVP, Fraud Director; and Tuyet Jerald, a Senior Treasury Management Consultant.

The consensus was that payment fraud is unnervingly common and businesses need to put layered protections in place. They also must regularly evaluate their systems and practices to make sure they are sufficient for the latest threats.  

Businesses should consider these three layers of defense: people, processes and technological protection.

PEOPLE

Businesses should consider a separation of duties for payments and administration, said Tuyet Jerald. One person should not be in control of all finances at a company; it creates opportunity for internal fraud and a second (or third, or fourth) set of eyes can help spot errors or signs of fraud.

While it's good to trust employees, it's also important to verify. This is true of everything from accounts payable to wire transfers. Also consider the culture of your organization, people should feel free to speak up if they see a potential problem.

It's important to educate your staff on how to spot and react to potential fraud. Phishing scams are so common and have become so sophisticated, it's easy to fall victim. For example, rather than automatically respond to a request to wire funds, staff should be trained to pick up the phone or go confirm requests in person.

"Stay out of the fraud zone and pick up the phone," said Jon.

It's also worth noting that scams are getting more sophisticated, thanks in part to technology like AI, said Jon. It increases the frequency, complexity and repeatability of some attempts.

PROCESSES

Create policies and procedures before fraud happens. It could be as simple as separating who approves invoices and who sends the money from the bank. Or perhaps a business only wants to have a secondary review for payments over a certain amount.

"Once you get them (policies) in place, great," said Tuyet. "But make sure you are regularly reviewing them."

Consider the common practices that can be updated. The use of paper checks, for example, is ripe for fraud. It is the most common form of payment fraud in terms of frequency. It puts all of a company's information out in the public realm: account number, location, routing number. Checks can easily be altered, or the information used for other scams.

Businesses should think about moving to other payment systems or eliminating manual payment processes. Mike McKean suggested that businesses prioritize their most secure payment methods first, such as ACH payments or commercial payment cards.

There tends to be a mindset of "that's how we've always done it, let's keep doing it that way," said Mike.
But he said that thinking can put your business and your vendors at risk. Consider offering a discount or other incentive to shift to more secure payment methods. He also suggested that businesses streamline operations by removing anything manual.

"Manual means errors," he said. "Automation means a clear audit trail if there was fraud."

TECHNOLOGICAL PROTECTION

Businesses should also consider working with their bank to find out what payment protection systems are available to them.

While these services do require some investment of time and resources, such as setting up an approved list of payments or verification of payments, the effort is far less than the cost some businesses incur facing fraud.

"The old way is probably not the best way to do business going forward," said Kevin. 
All the experts urged businesses to look over their own practices and to meet with their bank, be it Umpqua or elsewhere to review what options they have. Even something as simple as monitoring business accounts daily with online banking can help spot unusual activity.

"It isn't one solution that is going to fix it; it's multiple layers," said Jon.

You can access a full replay of the webinar online. To find out more about what fraud prevention tools Umpqua Bank offers, talk to a banker today or visit our website.