Fraud Prevention – Strategies Every Accountant Needs

Training employees about various types of fraud schemes and their early warning signs.Implementation of multi-factor authentication process with combination of passwords, biometrics or one-time codes for authentication.Monitoring the behaviour offinancial transactions forunusual or suspicious patterns.

An effective anti-fraud programme should be risk-based with regularly updated EWRAs that identify context-specific risks particular to each individual company, so staff can allocate personnel and efforts to where the danger is greatest and waste less time on low-risk typologies and typological areas.

Monitor Transactions

As well as causing financial loss to a company, acts of fraud can damage its reputation and diminish customer confidence, so businesses must be constantly vigilant and analyse transactions and customers’ behaviour to spot opportunities for fraud and put a stop to it as soon as it is identified.

Some of the recommended best practices of Suspicious Activity Monitoring are to map patterns and detect anomalies, to explore data, to stay abreast of emerging threats and regulatory guardrails.

Alerting off potential fraudulent activity attempts should rely on machine learning, which allows targeted detection of specific fraud typologies. Through the use of machine-learning decision models, extensive data sets are searched for regularities and abnormalities and relationships amongst the networks are identified which flag potential fraudulent activity risk profiles off before it materialises, so that companies can avoid compliance penalties and financial reputation.

Verify the Legitimacy of Websites

Fraud prevention must be a holistic effort, using a toolbox of tools and techniques. These could include identity-verification services – such as a document-authentication or biometrics service – analytics platforms powered by AI/machine learning to detect patterns or anomalies, or employee and customer training on how bad actors attempt to deceive.

Look at what appears in your browser bar address (URL) – specifically, where the real website begins. Real sites make you work less by putting a short, direct and identifiable name at the front of their URLs. Long, complex, or seemingly random names tend to belong to the fakes or fake-like sites.

In addition to a name that sounds authoritative and non-scammy, you should look for a padlock icon in the address bar to confirm that the website is using some SSL certificate to encrypt the data of users on the site, as well as a spelled-out privacy policy detailing how they collect and use user data.

Two-Factor Authentication

(Consumers will also be asked to verify access with two forms of authentication, one that they know, such as a password or PIN and one that they own, such as a physical hardware token, a smartphone app, one-time passcode or biometrics, which can serve as an added layer of defence by denying unauthorised account access to the hacker.)

Prompt your clients to enable 2FA on their accounts wherever possible – it’s easy to add 2FA to practically any email account, cloud storage, password manager, social media app, helpdesk vendor and more. And by leveraging 2FA, third-party contractors in the energy sector can securely access IT systems at their company locations remotely.

Internal controls can also help to mitigate fraud by spreading out responsibility for key tasks so employees have complementary assignments – in a shop, the employee who counts the collection of sales receipts could be separated from the bank deposit slip preparer, to thwart the embezzler who would normally have been able to master his balancing act.

Anomaly Detection

Those that do so effectively depend, first and foremost, on preventing fraudulent behaviours before they can even take place; therefore, all fraud-prevention policies need to be based on a risk analysis of all the likely and most probable types of fraud a business might face as well as a regular review of them.

In business analytics, anomaly detection tries to identify these outliers, either through statistical measures or using machine learning algorithms which construct reference baselines of typical behaviour (ie, past data sets) to spot what exceeds these thresholds.

Anomaly detection could identify spikes in energy use, suspicious revenue figures (as in the case of Theranos) and indicators of employee fraud (eg, abrupt changes to working schedules or questionable employee records).

Fraud Alerts

Any customer with reason to believe that he is a victim of identity theft or other financial crime can call any of the three major credit agencies and request an initial or active duty alert – both promulgated specifically to prevent identity theft and other financial crime – whereby the lender are informed that the consumer might be a financial-crime victim and, as such, should proceed with extra caution before extending new lines of credit.

Good fraud prevention requires subject- mater experts in the line of business context of the firm, along with periodic updates of the EWRA list so it targets actual risks rather than sucking up too many resources to mitigate relatively harmless typologies.

Fraud is an asset-protection, reputation-protection and brand-protection issue. The adoption of fraud-prevention solutions will help fintechs and neobanks to embed stronger internal controls that mitigate fraud risks while eliminating any possibility of customers coming to harm.