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Three strategies for small businesses to fight fraud

March 26, 2019

Despite advances in technology, fraud continues to be a major pain point in our modern society. Throughout my nearly 15 years in banking, I’ve seen the devastating consequences of fraud and how it affects small businesses. According to a recent study from the multinational professional service company, PricewaterhouseCoopers, nearly 50 percent of businesses around the world have been a victim of different types of fraud or economic crime.

There are many strategies that scammers use to separate you from your hard-earned savings. Aside from common frauds like identity theft, wire scams and cloned debit cards, check and Automated Clearing House fraud have been on the rise in the last few years. According to the latest report from the Federal Reserve, the combined value of ACH and check fraud rose from $6.10 billion in 2012 to $8.34 billion in 2015.

Small businesses are a prime target

Small businesses can be especially vulnerable to fraud. The Association of Certified Fraud Examiners reports that 30 percent of fraud cases occur in small businesses (those with fewer than 100 employees) and 60 percent of small-business fraud victims don’t recover any of their losses. Fortunately, these risks can be managed.

Following are three fraud prevention strategies that small businesses should consider implementing:

1. General strategies

• Get a locking mailbox and sign up for accounts with all mail service providers. One study from the U.S. Secret Service showed that the top two methods of non-technological identity theft were mail theft and rerouting of mail. Through creating a secure account, you will make it harder for someone to impersonate you and reroute your mail.

• Sign up for electronic delivery of financial statements and bills. Unsecured letters from your financial institution or vendors provide information thieves can use to compromise your accounts.

• Obtain an identity theft protection service. This service alerts you when your personal information is being used in ways that generally don’t show up on your credit report. These services can help you act immediately if your personal information is ever compromised.

2. Work with employees to help prevent fraud

• Create strong internal procedures that are easy to understand and implement. Although a suspected case of internal fraud may require confidentiality, a case of external fraud can be more straightforward. For example, if a cashier suspects a customer is using a stolen credit card, they should immediately notify a manager.

• Warn employees about types of fraud to watch out for, which commonly include:

o New account fraud: Setting up accounts based on stolen identity or personal information.

o Credit card fraud: Using credit cards without authorization.

o Check fraud: Using checks without authorization or using fake checks.

o Identity theft: Using another individual’s personal or financial information without his or her consent.

• Separate duties with checks and balances. Having more than one employee handle payroll, make deposits, and reconcile bank statements provides oversight and acts as a fraud deterrent.

3. Implement automated fraud prevention technology

Finally, your business can add another layer of protection through a sophisticated, automated system like Positive Pay from Zions Bank. Positive Pay helps businesses identify and report fraudulent and unauthorized payments by verifying transactions before completing payment.

Positive Pay uses a secure conduit to send the bank a daily list of authorized checks. After a transaction is submitted to the bank for payment, the system automatically compares it against the list. If an item is on record as having issues or has been altered, the system detects the mismatch and halts payment.

Banks Are a Valuable Ally Against Fraud

Despite the prevalence of fraud, you can help reduce your risk by implementing proven strategies and working with a financial institution that can support you. Banks have experience with fraud management and want to help you manage risk in your business.

Cameron Topliff is vice president and manager of Zions Bank’s Pocatello Yellowstone branch. To contact him, call 208-233-6176 or email Cameron.Topliff@zionsbank.com

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