How to keep your AP process wire fraud free

No matter how you look at it, fraud is on the rise. Over 80% of organizations reported being targets of an actual or attempted fraud attack in 2020, and the rate of suspected digital fraud grew to 52.2% between 2019–2021.

Wire fraud is just one of these increasingly common types of accounting fraud. In this blog, we’ll explore some common types of wire fraud, we’ll provide you with some examples to better understand what to look for and how to avoid becoming a victim, and we’ll discuss how an automated AP solution can help you mitigate instances of wire fraud altogether.

What is wire fraud?

A wire fraud scam begins when a fraudster reaches out to a company or individual using a form of electronic communication (like email, text messages, phone calls, or social media posts). They commonly ask for one of the following:

• To send large sums of money to specific and previously unused accounts
• To make changes to existing banking details
• For access to confidential information

If the company or individual falls for the scam, they are at risk of losing enormous sums of money — sometimes in the millions.

Here are a few examples of commonly experienced AP wire fraud schemes.

Phishing scams

Phishing attacks cost US businesses more than $2.7 billion in 2022, and should not be overlooked when considering types of wire fraud.

A phishing scam (also known as BEC: business email compromise) typically starts with a fairly innocent-looking email. The email seems like it’s from a trusted source, such as a vendor or a trusted individual, but it’s actually from a fraudster trying to gain access to financial or confidential information. It can include requests for payment transfers, changes to existing bank account details, or urgent demands for financial or confidential information like credit card details.

Executive expenses

Another type of wire fraud is the Business Executive Scam (BES). Accounting departments receive an email that looks like it has been sent by their company’s HR or IT department. The communication states that an ‘executive’ is working off-site and needs to take care of an outstanding payment right away. A large payment is urgently requested, usually to a specific bank account that is, of course, fraudulent.

Overpayment: new clients and vendors

Overpayment scams are also becoming more and more common. There are two commonly experienced scenarios.

In one scenario, someone posing as a new client will express their interest in buying your product or service. However, when they send payment via check, the amount is larger than expected and it appears they have overpaid. The ‘buyer’ insists it’s an error and requests that the balance is returned using a money transfer service. However, the account used for the money transfer service is connected to the fraudster, not a legitimate client.

In another scenario, a salesperson will call insisting that they are your current supplier. They’ll offer promotional pricing for a limited time that seems to be too good to be true. However, when your invoice arrives you’ll immediately see that you’ve been the victim of fraud. You’ll often find that you have overpaid 50% to 300% above normal pricing.

How to prevent wire fraud

Here are some guidelines that you can follow to identify and avoid attempted wire fraud attacks.

Be wary of suspicious communications

A fraudulent email communication or phishing scam commonly displays the following indicators:

• Unexpected “urgent” requests
• Unknown senders (individuals, companies, suppliers, etc.) you haven’t dealt with in the past
• Spelling, grammar, or formatting errors
• Unknown or unexpected attachments
• Email addresses that are similar to what you’d expect but not the same
  • From THomas instead of Tom
  • From @veryrandomemail.com instead of @trustedcompanyname.com
• Invoices that are missing specific vendor details such as addresses, phone numbers, or company names
• Unexpected requests for large sums of money, access to bank account or confidential information, or requests to share login credentials

You can also use tools like Google’s Phishing Quiz or PhishMe from Cofense to simulate phishing attacks and help train yourself and your teams to know what to look for.

Confirm requests with your clients

Did you know that only 50% of small businesses check the details of an emailed invoice when asked to make an online payment? Statistics like these remind us how important it is to verify all client or vendor requests for payments or changes to payment instructions, especially if they come through email instead of from a direct phone call with someone you trust.

If you receive an unexpected request, make sure to use a phone number that you’ve used previously and that you trust, and confirm the information before you take any action.

Implement cybersecurity policies

Work with your IT Team to implement a company-wide cybersecurity policy, including yearly training about staying safe from scams and online fraudsters. Your IT Team will know what elements they need to cover, but here are some things to consider:

• Requirements for strong passwords and two-factor authentication (2FA)
• Encryption for sensitive data
• Spam and phishing filters for email accounts
• Standard procedures to report potential phishing emails or scams

Set up multiple layers of approvals with independent checks and balances

Automating and separating expense approval workflows is another great way to detect and prevent fraud. Here’s how:

• Have at least two levels of approval for all purchases
  • Separate approvers based on custom matrices such as budget, department, or location
• Use an electronic expense management
  • Create a digital audit trail

With these checks and balances in place, you’ll gain insight and visibility into your entire accounting workflow, helping you stop fraud before it happens.

How does AP automation help?

Accounts payable is one of most manual processes in accounting, making it easier for fraudsters to tamper with records, forge check endorsements, falsify communications, and fabricate approvals. In fact:

• 71% of organizations claim that manual data entry and inefficient processes are their top concern
• 72% of businesses that made payments via paper checks have experienced fraud

An automated AP solution like Quadient AP can provide sophisticated controls to mitigate internal and external fraud attempts and avoid scams such as duplicate payments, false billing, fraudulent payments, unapproved vendors, illegitimate expenses, and tampered financial reporting.

AP automation software can automatically flag suspicious changes while establishing accountability and digital audit trails across multiple layers of your AP process. For example, by managing your payments through an AP automation provider, all invoices will have to pass through several layers of approvals before they are released.

Are you ready to automate?

65% of organizations experienced payments fraud in 2022. If you’re ready to avoid being part of that statistic and adopt Quadient AP as your automation solution, we’re here to help. Book a demo today to see how we can help you!