All Posts Tagged: financial transactions
Wire fraud is a growing concern for businesses that can be difficult to detect before the damage is done.
An employee receives an email purportedly from the CFO of the company requesting an immediate wire transfer from the business’s bank account to an overseas account. The employee initiates and approves the outgoing wire transfer, and several thousand dollars are sent from the business’s bank account. Unbeknownst to the employee, criminals have gained control of the CFO’s email, and the wire transfer request is fraudulent. The money is most likely gone.
Wire fraud can be particularly costly to a business. As the Federal Trade Commission points out, “Know that wiring money is like sending cash. Con artists often insist that people wire money, especially overseas, because it’s nearly impossible to reverse the transaction or trace the money.”
Wire fraud is a growing threat to businesses as criminals become more sophisticated at hacking email and internal systems of companies. But there are steps you can take to protect your business.
To help you look for signs of potential fraud, here are some questions to ask:
- Do you know if the wire was created based on an email, phone call, fax, or text from another employee or someone known to the business?
- Can you confirm that the request to initiate the wire is from an authorized source within the company?
- Is there only one approver of the transaction? Two or more is preferable to protect against internal and external fraud.
- Is this an urgent request? Fraudsters gain an advantage by pressuring employees to take action quickly without confirmation of all the facts.
- Were there instructions to keep the request confidential and not to share the email, phone call, fax, text, or wire request with anyone else? This is another tactic to discourage the employee from verifying the legitimacy of the wire request.
Businesses can also implement checks and balances to reduce the threat of wire fraud. Many companies require a valid purchase order number and approval from a manager and the finance department to spend money. For large financial transactions, your business can implement a similar process to verify the legitimacy of wire transfers before they go through. A dual-control system for large financial transactions helps protect against errors, employee misconduct, and external fraud.
Here is an example of a purchase order process with built in security controls that can be applied to wire transfers: When an employee submits a purchase request, a senior manager with signing authority and the finance department need to approve the purchase request. Once the request is approved, the finance department provides a purchase order number. Any checks above a certain amount that the business issues must reference a purchase order number.
Similarly, a business can require that all wire transfers over a certain dollar threshold must be matched to a reference number to ensure they are linked to a previously approved purchase or service.
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