While payments fraud decreased in 2020 compared to the previous year, 3 out of 4 organizations still experienced payments fraud, according to survey results from the Association for Financial Professionals and JP Morgan. In this post we will look at the most common types of payments fraud from last year and how you can protect your business with accounts payable automation software.
Common Types of Payments Fraud
More than 60% of survey respondents said that accounts payable was the department most vulnerable to payments fraud. The good news is, with the right software you can implement controls quickly and prevent payments fraud.
Top Types of Payments Fraud in 2020
- Business Email Compromise (62%)
- Outside check or credit card forgery (52%)
- Direct fraud from vendor or outsourced professional services firm (19%)
- Account Takeover – Malware, spyware, hacking etc. (12%)
How Safe are ACH Payments?
How to Prevent Business Email Compromise Payments Fraud
While all the other sources of payments fraud above decreased in 2020 compared to the previous year, Business Email Compromise (BEC) increased. According to the FBI website, a common way this occurs is a fraudster compromises one of your regular vendors' email server and sends fake invoices with updated mailing addresses, or an outside party impersonates one of you vendors with an email address that is deceptively similar and mimics their invoice format.
“Versions of these scenarios happened to real victims,” said the FBI website. “All the messages were fake. And in each case, thousands—or even hundreds of thousands—of dollars were sent to criminals instead.”
Controls for Preventing and Containing BEC Payments Fraud Include:
- Implementing company-wide policies to provide verification of any changes to existing invoices, banking info and contact information (cited by 70% of survey respondents)
- Confirm requests for funds transfers by calling an authorized contact at the vendor company using an approved contact list and not numbers listed in an email (67%)
- Strict internal controls prohibiting payments initiation based on emails or other less secure messaging systems (66 %)
- Require signatures from senior management for invoices over a certain payment threshold (58%)
- Strict user authentication and tracking to access network and payments initiation
Getting Your Vendors to Accept Electronic Payments
How to Prevent Accounts Payable Fraud with AP Automation
With the right AP automation software, it is easy to implement the controls listed above to prevent BEC payments fraud. AP software can also help secure your payments against internal and external fraud in the following ways.
- Prevent false billing, fraudulent payments and reporting fraud by aligning security and payments teams on one solution with user-based approvals and time stamping for audit traceability/ approvals tracking, as well as customizable workflow management controls.
- Prevent phishing and duplicate payments with built-in detection, prevention & security
- Securely transfer funds from your bank directly into your vendors' with ACH direct
- Positive Pay – Banks only cash paper checks on a pre-approved basis
- Reduce reporting fraud by integrating payments software directly with your accounting software if available to eliminate manual data entry.
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