Financial Transactions: New Threats, New Solutions

Conducting business electronically has become the norm in today’s world. And, while updates in technology have made doing business quicker and more convenient, it has made fraud more convenient, too. Thinking that spotting fraud is as easy as seeing a misspelling in a subject line or simply not making payments for oddball requests is an outdated approach. It’s time for a refresher on the sophistication of today’s fraudsters.

As financial fraud continues to evolve, the best way for businesses to protect assets is to have a strong relationship with a dedicated banker. A bank’s treasury management department works to advise clients on ways to strategically administer their cash flow options and large financial decisions, and that includes understanding and actively managing potential fraud risks. It is best that businesses view the bank as part of their fraud prevention team, with the business watching from one side and bankers from the other.

What’s New In Fraud?

Business fraud in 2024 is not one size fits all. Some businesses deal with account takeover threats, others with intercepted payments. In Phoenix specifically, there has been a rise in schemes involving social engineering and business email compromise. These scams can be elaborate and seem legitimate — sometimes spanning days, weeks or months so that many don’t think twice before responding to a scammer with sensitive information. Fraudsters can learn a company’s frequent digital behaviors and hack emails to make their approach more realistic and credible in appearance. For example, an email could come from a known vendor stating they have been compromised and need a new payment method. The email address and language could be familiar, but it’s actually a fraudster requesting sensitive banking information.

With so many new — and realistic-looking — tactics, if business owners haven’t reviewed the strengths and weaknesses of payables plans with their treasury management officer, it’s time to do so.

Steps Businesses Can Take

First, and most importantly, businesses should work to create genuine relationships with vendors and associates — especially with bankers. Fraud is about creating belief in scams, but if a business is in regular communication with its bank, it’s significantly harder for fraud attempts to look credible.

Bankers should be continuously working to understand the businesses they work with — how they operate, pay vendors and potential risk points — so any deficiencies can be spotted immediately. They should also regularly share best practices from a process standpoint; this includes utilizing fraud prevention solutions that can help identify fraud attempts.

Also integral to efficiency and protecting businesses from fraud is implementing payment solutions. Two that can have an impact on a business’s bottom line are Visa® Payables Automation (VPA) virtual cards and our own UMB Integrated Payables. VPA offers a simple, secure way to pay suppliers via virtual payment rather than paper check, which means more secure transactions and reduced processing costs. Implementing VPA is easy because clients still go through their traditional procurement process, receive and approve invoices the same way — but instead of cutting a check, they push out an electronic Visa payment that uses a one-time-use Visa account number. Once the vendor processes the payment, that one-time Visa account number is no longer valid and is useless to a fraudster.

For further efficiency, some businesses implement a fully integrated payables program, which encompasses both card and electronic payments. Automating and incorporating all payment types, including virtual cards, into one payment solution not only streamlines the entire AP process but also improves security and business continuity. With an integrated payables program, a company can maintain complete control over funds and instruct the bank when to release transactions. This prevents fraud by allowing for dual control over file processing, transaction review and approval — and is very effective in detecting the three main types of fraud in the payment process: duplicate vendors, phantom vendors and missing checks.

Outside of implementing new technologies, businesses should make it a regular practice to give payment processes a second thought. If there is an unusual link asking for payment, they should pause for a moment and pick up the phone to touch base with the vendor. It’s important to remember that emails may look very official but, if they request a new step or something out of the ordinary, it’s always best to verify the request over the phone or in person. It should always raise a flag to hear about a change in payment processes for the first time in an email.

While fraud has become more sophisticated, so have banking solutions. Working with a banking team can help take business owners from a reactive to proactive approach and protect their bottom line.

Fast Five Fraud Tips

Account holders should …

1. Call before they click.
2. Not send money to anyone they don’t already know.
3. Know their vendors and bankers personally.
4. Not share financial information via email.
5. Understand that just because they don’t use an account often doesn’t mean they don’t need protection; in fact, such an account may be the most vulnerable.

Phil Neidhart is senior vice president of treasury management for UMB Bank in Phoenix. He has more than 22 years of experience in the financial services industry. Neidhart earned BS in finance from W.P. Carey School of Business at Arizona State University.