Three Simple Rules to Protect Your Business Against Fraud

It’s common to assume that fraud only happens on an individual level, but businesses are prime targets for fraudulent behavior too. In fact, the results can often be more devastating since a large check deposited from a business – or into a fake business account – raises fewer eyebrows. Businesses often operate on a larger scale, making a bigger payoff for the fraudster worth the effort.

Scams related to businesses have become so prevalent that we often say it is no longer a question of “if” fraud will happen, but rather “when and how” it will happen.

A few simple rules can help protect your business and safeguard your assets.

Cyber Crime or Fraud?

With the advent of email and text, cyber crimes have taken a more prominent role in raising red flags for scams. By definition, issues with cybersecurity happen electronically via the Internet, text messaging, email, or phone calls. There is essentially a layer of electronics between you and the scammer.

Fraud is more direct and often happens “in person” – even if the scammer and the victim aren’t present at the same time. Good examples of business fraud include:

• counterfeit cash or checks
• altered checks that are stolen and made payable to another person
• opening a bank account using a stolen business’ name and identification information
  

One of the most basic and most common types of fraud against businesses is someone simply stealing a check or bank statement out of an unsecured mailbox – on either end of the route – and altering the Payable line to their name or a fraudulent business name and cashing the check.

Timing is Everything

Unlike personal accounts that have up to 60 days to report an issue, businesses only have 24 hours to dispute an unauthorized charge or other suspicious account activity. This timeframe is mandated by the Uniform Commercial Code (UCC), while the consumer timeframe is governed by Federal Reserve regulations. Unfortunately, most businesses do not become aware of the fraudulent act within that 24-hour window.

Another thing to consider is that in most cases, once money is taken out of your bank account, it is gone. Many people associate fraudulent charges with credit cards, which often offer extra protections that can void or cancel the transaction or recover fees on your behalf. However, once money is withdrawn or transferred out of your business bank account due to an ACH transfer, wire transfer, cryptocurrency transfer, or a check getting cashed, the money cannot be recovered through financial channels. It now becomes a criminal matter, and money is rarely recovered even if the scammer is caught.

RULE #1: The first rule of protecting your business against fraud is to ACT FAST! Call your bank first.

• Check your online banking and eStatements immediately.
• Monitor accounts daily.
• Report suspicious behavior as soon as you notice a red flag.
  

It’s better to be safe than sorry. If you have a question about a transaction, we don’t mind checking information and are happy to ease your mind. Lake Ridge Bank has the tools in place to stop a transaction immediately if we catch it early enough.

Recognize Moments of Increased Risk

While business fraud happens relatively consistently throughout the year, there are moments or events that are associated with a spike in fraud attempts, including:

• Major weather events. Hurricanes, earthquakes, tornadoes, flooding, and other natural disasters are often followed by fake charity funds or disreputable clean-up crews. You might have to wait a little longer, but it is in your best interest to only work with reputable agencies who have been around in your community for a long time, like the Red Cross or United Way.
  
• Moments of transition. Travel fees and shipping scams are ripe for fraud. There is often a lag between payment and realizing that the expected activity did not occur as planned. End-of-year accounting and tax time are also moments of increased activity outside of your normal processes and may offer more “cover” or chaos for a fraudulent act.
  
• Charity or support during a crisis. Fraudsters play on your emotions and goodwill. Did a local family experience a fire or car accident? Did your high school football field get vandalized? If there is a community fund for donations, it should happen via a reputable organization or be housed through a local bank to make sure the right people are receiving the money.

RULE #2: The second rule is to increase awareness during vulnerable times.

• Choose established, reputable organizations or agencies when contracting work.
• Deal directly with the charity or family/school for community causes.
• Be vigilant in a crisis.
  

Tap into Tools at Your Disposal

Lake Ridge Bank offers a variety of Treasury Treasury Management tools tools to strengthen the security of your accounts and transactions. Some are free and simply require you to adjust account settings accordingly. Others may include a fee or subscription to activate. Talk to your business banker about the following options:

• Sign up for e-Statements. This step is so effective that Lake Ridge Bank will no longer support paper statements after January 1^st. Learn how to enroll in e-Statements now.
  
• Use Positive Pay. All cashed or deposited checks/ACH payments are scanned against a list uploaded by your business to catch any altered payments or situations that don’t match your register. This is particularly helpful in reporting issues within the 24-hour window.
  
• Adjust settings on account alerts. Your business banker or Treasury Management professional can help you determine the best settings for specific items, such as alerts if your account balance goes above or below a set amount. You can also get alerted about certain transaction types or transactions of a sizable dollar value.
  
• All checks should be mailed at the Post Office, not your mailbox. And since you can only control the security of your mail on your own end of the transaction, we encourage electronic banking whenever possible.
  
• Consider a business credit card. Credit card companies offer additional protections for your payments.

RULE #3: The third rule of fighting fraud is to make it harder on the scammer by using tools that provide an extra layer of protection and awareness.

For help in reviewing your risk and establishing stronger protections against fraud against fraud, contact your business banker banker. We’re here to help!