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Good to Know Series: Fraud Update

Every year, $980 billion worth of fraudulent transactions are processed in the United States.  This number, from a recent webinar presented by Woodward Events and featuring Frank Abagnale (of "Catch Me if You Can" infamy), was so shockingly high that we felt it was time to share some of our thoughts on fraud and identity theft prevention. 

 

  1. Ensure segregation duties.  Under the Uniform Commercial Code, which all banks are required to follow, if fraudulent activity is discovered on an account, the bank is not liable for the charges if it can prove there was no segregation of duties and/or internal controls within the company. Make sure more than one person is involved in completing some or all of the bookkeeping tasks. Take steps to ensure the same individual is not printing and signing checks and reconciling the bank accounts.  Consider having a copy of the bank statement mailed to an offsite location for opening and review by an owner or other management.  75% of payments made from one company to another in the United States are via check, so review vendor names and addresses regularly to ensure checks are not being diverted.   

  2. Watch equipment.  In a recent survey conducted by CBS Evening News, 60% of business owners  did not know there was a hard drive in their printer or copier.  In truth, all digital copiers made after 2002 contain hard drives.  These drives will contain records of every single copy or print function that has ever been executed on the machine.  Some vendors will offer to encrypt them for a fee at time of purchase, but many do not.  Always ensure you remove the hard drive before trashing, selling, or returning equipment to a lessor.   

  3. Mobile isn't safe.  Many of us do our banking on applications on our mobile phones, but most cellphones do not have the same firewalls and security setups that computers today feature.  In addition, transactions initiated over wireless networks or data plans have the ability to be intercepted by hackers.  There is also a window of time for checks that are deposited via cell phone photography technology to be immediately taken to a bank and deposited again.  Mobile wallet technology carries similar risk to banking applications, and indeed, wireless payments are in effect doing business using an unsecured device.   

 

Fraudulent events and information theft happen most often because of the human side of a transaction or company.  Therefore, education is the most important tool available to fight fraud.  Take action now to review you internal controls and evaluate your antifraud policies.  Consider implementing a code of ethics within your company.   

 

Please check out www.abagnale.com for more information on fraud prevention.  We consult on internal control and policy and procedure manuals, so reach out to us if you think it's time to make a change. 






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