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Protect your company against fraud. Summer Massey, Loan Manager at Arvest Bank and Kala Forehand, Treasury Management Adviser at Arvest Bank, have tips to guard against internal and external fraud in your company.
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- - Today we're going to talk about something scary: fraud.
Hi, I'm Summer Massey and this Kala Forehand with Arvest Bank. She works with customers to help manage their cash and help protect them from fraud. We've all heard stories about check fraud, but there are other ways that fraud can occur.
Can you give us some examples, Kala?
- Yes, there are two main types of fraud. You have your internal fraud and your external fraud. So internal is exactly what it sounds like, somebody within an organization is trying to steal or abuse company assets. A real life example of this would be an office manager that pays the invoices for the company and is paying invoices that are not real.
Also, if an employee has access to a company credit card they may be making personal purchases on that card. That would be an example of internal fraud. External fraud is usually the first thing most people think of when they hear the word "fraud." And in the banking world, we're seeing this each and every day, so it's very important that we're talking about this.
So for example, if a customer is writing payroll checks to their employees, they're giving that check to the employee, the employee then turns around and takes a front and back picture through their mobile app to make a deposit and then they throw it away in a public trash can. At that point, the business owner's information is exposed. Someone finds the check in the trash can. They start calling all over to different bill collectors to make payments using an account number and routing number of a business owner. At that point, the customer logs into online banking. They see ten different transactions totaling up to thousands of dollars coming out of their account that they did not authorize.
- Wow, Kala, that can be devastating to a small business.
- It absolutely could be, but luckily there are some ways to reduce your risk. So in the example we talked about earlier for internal fraud there are some simple policies and procedures that a business owner can implement, such as dual control approval for all invoices being paid, so money leaving the company. Also, you can have an employee handbook that all of your employees will sign acknowledging that they've read the policies. Using a credit card that restricts where your employees can spend money and how much.
These are all the things that can easily be implemented. External fraud, unfortunately is not as easy to resolve on your own. That's why it's so important to find a banking partner that you trust. Business owners don't think twice about insuring their car, their home, their office space. But what about their finances? There are layers of protection that can be added in every business banking relationship. Simple tools such as an ACH fraud filter, for example, could make a huge difference.
In the example we discussed earlier our customer was using an ACH fraud service so he was able to reject all ten of those transactions which ultimately saved him $12,000 in unauthorized transactions. There are also tools that would allow a business to upload a file of checks that they've written and then their bank will compare those checks against that file. If an item is not in that file, the item is pushed back to the business owner to ultimately decide, do they want to pay that item or not?
- Wait a minute, don't I have protection from the bank when fraud occurs?
- That is a great question, Summer. I try to have this conversation will all of my clients because most business owners don't know what protection level they have. As a consumer, we have 60 days to go into a bank and file a dispute on a transaction. As a business owner you only get a 24 hour window for electronic transactions. That's not a lot of time.
- You're right Kala, trusted advisors are important at every stage. You gave us a lot of helpful tools. In past episodes, we've covered many ways you can ensure the success of your business. If you would like to watch past episodes go to sbjlive.net and search "Why Businesses Fail." Thank you!
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Very good information. Thank you for sharing this.LS