Fraud by Impersonation

May 1, 2018

E-mails and electronic transfers are essential tools for today’s competitive business, but they can also be breeding grounds for fraud by impersonation. Understand how the scammers work so you can fight back against these deceptive (and costly) schemes.

Regardless of company size, private businesses will experience an average $180,000 in damages from fraud. In many cases, these breaches occur because a criminal impersonates you or someone authorized by you to make or receive transactions.

Vendor Impersonation

Nearly a third of asset misappropriation is a result of fraudulent billing. While the tactics vary, losses primarily occur in one of a few ways: > Bogus companies send invoices and hope your A/P clerk pays without investigating.

> An employee sets up a fake vendor account and submits phony invoices.

> Criminals hack your vendor data via email spoofing and pose as an existing vendor to request payments be rerouted to a different bank account.

Executive Impersonation

Scammers have learned to take advantage of busy executives authorized to make large transactions, going to great lengths to mimic your business practices. Here are just two possible scenarios:

> A fraudster, posing as you or another executive, sends an email to your accounting department authorizing a large transfer of funds to his bank account.

> A criminal steals your banking information, calls a bank employee, and impersonates you to authorize a transaction into his own account.

Seven Ways to Combat Fraud

Among organizations targeted by financial theft, those with anti-fraud controls in place will suffer half the damages as those that lack a formal plan. Here's what you can do to be ready.

  1. Give employees a way to report fraudulent activities anonymously.
  2. Have an outside firm conduct regular audits of your books.
  3. Keep key cash-related functions separate and use dual controls for all transactions.
  4. Keep vendor files locked and require supervisor approval for adding or changing vendors.
  5. Twice a year, require employees to change computer passwords.
  6. Get to know your vendors and your bank’s relationship manager.
  7. Use a fraud prevention service like SNB’s Positive Pay.