Cybercriminals use traditional and sophisticated methods to take over corporate bank accounts, spoof identities and steal funds. The Federal Deposit Insurance Corporation (FDIC) insures deposits if a participating bank fails. But Investopedia warns, “the banks themselves have no federal guarantee to solvency in the event of a major cyberattack.” In addition, you may have to opt into certain bank account protection and fraud mitigation services to receive assistance during and after a security incident.
Bank fraud prevention starts with your small business. Exploring common types of bank fraud and scams can help you understand how thieves gain access. Then, you can learn how to reduce risks and protect your bank account by strengthening cybersecurity measures and working with your financial institution.
Understanding the types of bank fraud
According to LexisNexis Risk Solutions, “Fraudsters are leveraging fake identities, synthetic identities, cyberattacks on account creation or identity spoofing for account takeovers.” Indeed, JPMorgan reported 71% of businesses “were victims of payments fraud attacks or attempts in 2021.” Its study found accounts payable departments were most susceptible to business email compromise (BEC) scams.
Types of bank fraud include:
Phishing scams | Cybercriminals use social engineering tactics like phishing to steal protected information while pretending to be a trusted institution or employee. |
Pressure tactics | Fraudsters request payment for unreceived products or services. This method can occur over email, phone, text or via postal mail. |
Corporate account takeover | Malicious actors gain access to employee credentials and leverage them to manipulate a company’s bank account. |
Internal fraud | Without sufficient checks and balances, rogue employees can commit payroll or accounting theft. |
Review your financial organization’s fraud prevention initiatives
Banks have different agreements and programs to help businesses prevent unauthorized transactions. Learn about the services your institution offers for fraud mitigation and account protection. You may need to enroll in these services or select accounts with improved features. Also, read your account agreement to understand what security measures your business is responsible for. If you fail to implement cybersecurity safeguards, your liability could be higher.
The American Bankers Association (ABA) suggested business owners look into:
- Positive Pay or other services offering callbacks
- Device authentication
- Multi-person approval processes
- Batch limits
Tighten your company’s cybersecurity posture
Protecting your business account involves improving your company’s cybersecurity. Take a multilayered approach to security by having several ways to detect and defend your systems, including onsite and remote employee hardware and software. Out-of-the-box anti-malware and password management tools can secure basic services, whereas managed cybersecurity services and advanced technologies offer more comprehensive coverage.
Prevent hacking and cyberattacks by:
- Using email spam filters
- Blocking or limiting access to suspicious websites
- Leveraging multifactor authentication
- Monitoring network traffic
- Having an incident response and recovery plan
- Updating firmware and software regularly
Implement employee cybersecurity training programs
One infected device can result in an account takeover. Suppose an employee’s personal cell phone automatically connects to your business Wi-Fi. If they’re hacked at home, your IT infrastructure is compromised once they connect to your network. Likewise, a worker who inadvertently gives out sensitive information can give a cybercriminal the keys to your bank account.
Train your team on the zero-trust concept. This idea means no person, business, software program or device should be blindly trusted. Then follow up with regular, in-depth training on common scams and cyber threats.
Build checks and balances into accounting and payroll systems
Having clear procedures for approving and paying invoices or expenditures reduces the possibility of employee theft and helps you catch human errors quicker. Only a limited number of individuals should be able to pay invoices and place orders. These policies should extend to receiving inventory, ensuring new stock is physically checked before signing the confirmation form. Accounting programs can help you maintain records, whereas an independent auditor can discover potential vulnerabilities or problems.