In today’s digital payments environment, corporate treasurers face an increasing amount of sophisticated fraud threats and attacks. As the digital ecosystem continues to become more complex, global, and instant, it’s important to understand the risks and best practices to help detect and respond to fraud and keep your team safe. In this article, we’ll dive into the reality of today’s evolving fraud landscape and how you can protect your business from these new threats.
The evolving fraud landscape
Three fraud classifications have emerged prominently:
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Digital transformation fraud
As treasury becomes increasingly automated, digital transformation has introduced new fraud risks that are more sophisticated and harder to detect. Fraudsters are leveraging advanced tactics like phishing, SMS scams, and AI- generated deep fakes. -
Vendor or business email compromise fraud
Email compromise within a business or a vendor continue to pose a growing threat in the evolving fraud landscape, specifically related to payment instructions originating from a legitimate business or vendor email. Cyberattacks targeting businesses and/or vendors, such as malware leading to email compromise, ransomware, data breaches, or zero-day exploits can lead to cascading risks, ultimately causing fraud attacks. It’s important for treasurers to assess not only their own controls but also their vendors controls and overall resilience against financial fraud attacks. -
Real-time payments / instant payments fraud
Real-time and instant payments fraud pose heightened risks due to the speed of the transactions. Thus, it is critical for financial institutions to implement robust real- time monitoring controls that rely on strong datasets and advanced analytics. These tools are essential for detecting and responding to fraudulent activity.
Heightened regulatory expectations related to payment fraud
Evolving regulatory expectations including the upcoming NACHA 2026 rules introduce new requirements for financial institutions related to enhanced monitoring on inbound ACH transactions. This shifts more responsibility to recipient banks to detect potential mule accounts associated with fraudulent activity. The new system aims to strengthen fraud prevention across the ACH network. Five best practices to protect against fraud.
Here are five best practices that can help shield your business from fraud threats:
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Comprehensive internal controls
Comprehensive internal controls are the foundation of an effective fraud prevention strategy. This includes multifactor authentication, maker –checker protocols, behavior monitoring, and real time analytics that identify unusual patterns in payments. By layering these controls and leveraging various data sources, financial institutions and businesses can detect threats earlier and mitigate fraud. -
Vendor and third-party management
Prior to onboarding any vendors or third parties, it's important to understand their processes and controls. Any vendors or third parties utilized should have a similar approach and mindset to fraud prevention. -
Employee training and awareness
It’s vital that employees, from their initial onboarding, have a strong understanding and awareness of fraud and various prevention measures. Through strong and continuous communication and training, it becomes the responsibility of all employees to help combat against fraudulent activity. -
Technology and real-time monitoring
Technology and real-time monitoring play a critical role in fraud prevention by acting as a critical line of defense. Banks should employ real-time monitoring while clients should ensure that their networks are secure, have callback procedures in place for business or vendor email compromise scenarios, and can effectively leverage payment/approval rules (e.g. multiple layers of approvals on payments) that balance the need for security with convenience. -
Incident response planning
A strong process for incident response planning is essential to minimizing fraud. There should be a clear escalation path and various mechanisms in place to help flag any suspicious behavior. By having a strong incident response plan, businesses can ensure faster detection and remediation of fraud.
In addition to following the practices above, having a defined risk-management framework can also decrease the likelihood and impact of fraud. Core principles of a well-crafted risk management framework include A well-structured fraud prevention program combining layered preventative and detective controls. This includes defined roles and responsibilities around monitoring alerts, executing controls, and maintaining ownership fraud activities. Embedding these responsibilities within the business creates a culture of proactive risk management and fraud prevention.
Conclusion
As fraud tactics grow more advanced, corporate treasurers must lead with a proactive mindset. By implementing strong internal controls and by building a culture of fraud prevention, businesses can reduce their exposure to fraud.