Get a 360 Degree Vantage Point on Payments Fraud

  • October 19, 2015

Payment transactions carry inherent risks, requiring businesses to be diligent about preventing theft and fraud. The good news is that a 360-degree view of prevention and controls can offer the best protection.

Where the risks are — some familiar, some surprising

At 77 percent of losses, paper checks continue to be the highest risk payment type, even with declining overall use, according to the 2015 AFP Payments Fraud and Control Survey. Checks also account for the largest dollar amount of loss due to fraud. For internal or occupational fraud, the 2014 Global Fraud Study by the Association of Certified Fraud Examiners put the median loss at $145,000, with 22 percent of fraud involving losses over $1 million.

In both cases, the good news is that the implementation of anti-fraud controls reduced total fraud losses and lowered the fraud duration.

Receivables at Risk

While the focus of fraud prevention typically focuses on payables, there are also risks with accepting check payments. When you accept a paper check from a customer or other source, you become responsible for safeguarding the payer account information. A misappropriated check can be used to create counterfeit checks or commit fraud via electronic payments such as ACH.

Here are some simple ways to help reduce these risks:

  • If you process paper checks using a remote deposit method, make sure to securely store scanned checks in a closed environment, such as a locked cabinet or safe, to prevent unauthorized access or theft during the retention period. Destroy checks after the required retention period by an unrecoverable manner like shredding or incineration.
  • Employ separation of duties in your receivables processing to minimize the threat of theft and internal fraud. Most remote deposit solutions offer features to separate scanning and depositing duties for paper checks — one employee should not both process and record the payment.
  • Reject electronic payments that may be unexpected from unknown sources. By accepting ACH or wire payments from an unknown source, you risk sharing your own private account data with potential fraudsters.

Also, as with breaches, the theft or loss of private payer information, if publicized, can result in costly agency or federal fines, and the loss of customer confidence and business.

Protect Your Payables

Accounts payable presents businesses with a variety of risks, from counterfeit checks written on your demand accounts to internal fraud. Segregating payment processing roles within your organization and establishing dual controls for your accounts payable functions can help reduce the most common forms of fraud.

Here are some practical prevention strategies to consider:

  • Consider a positive pay solution that requires paper and electronic payments be matched against your intended transaction files before payment, reducing the risk of fraudulent payments. In the AFP study, 79 percent of companies reported using positive pay as a primary method for fraud prevention.
  • In practice, set positive pay defaults to "return all" when decisions can't be made by the deadline.
  • Segregate duties between those who provide issue information and those who input pay or not pay decisions.
  • Review your audit reports on a regular basis and thoroughly investigate any unusual transactions.
  • Establish blocks and filters to prevent unauthorized ACH debits.

Enhance your fraud prevention strategy

SVB can help secure your receivables and payables operations with comprehensive tools and services that complement the other controls you implement within your company. Contact your Global Treasury & Payments Advisor to review your payables and receivables operations and implement a multi-layered strategy for optimal security and peace of mind.


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This material is provided for informational purposes only. The conclusions expressed are based upon limited information available to Silicon Valley Bank regarding your company's fraud detection and prevention programs, and should not be seen as a substitute for obtaining your own independent assessment of such programs. The security of your operating system and your procedures for conducting banking transactions with us remains your responsibility. Silicon Valley Bank is not responsible for any cost, claim or loss associated with your use of this material.