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How to Prevent Fraudulent Bank Transactions in Your Account

Electronic Bank Transfer FraudIn the “old days” (insert my sweet grandmother’s voice), accounting employees waited to reconcile cash until the monthly bank statements were received in the mail. Today, companies are “going green” to avoid monthly fees by waiving paper statements. It’s far easier and more convenient to review daily transactions through the bank’s website.  But is pressing that easy button causing you to overlook fraudulent bank transactions in your account?

Online banking, wire transfers, and electronic funds transfer (EFT) by debit and check cards are becoming more and more common. While these methods reduce processing time, they also make it easier for an employee or someone outside of the company to steal directly from a bank account. It’s very simple for someone to slide in an additional monthly cable bill every so often. 

It’s important for companies to have strong internal control systems in place to prevent the chance of fraudulent bank transactions in their accounts. The U.S. Chamber of Commerce estimates 75% of employees steal from their employers, and many steal continuously. The FBI has recently had upwards of 400 investigations tied to electronic bank transfer fraud active at a time. Depending on when the theft is detected and how much is lost, companies could be out of pocket for the full amount. Is your company ready to face these statistics?

Simple Tasks All Companies Should Complete on an Ongoing Basis

In a previous blog post, we discussed the importance of segregation of duties within accounting departments. In addition, we suggest adding a layer of review over the cash disbursements cycle. Here are a few simple tasks all companies can easily implement and should complete on an ongoing basis to prevent fraudulent bank transactions in their accounts:

      • Un-opened bank statements should go to someone who is not involved in reconciling cash. Ask questions about transactions on the bank statements. If someone knows the statements are being reviewed, this may deter them from committing fraudulent bank transactions.

      • Bank reconciliations should be completed within a few days of month end. There’s no need to wait for the postman to deliver those statements. These can be printed from your bank’s website.

      • Review bank reconciliations timely and compare to the general ledger. Concentrate on reconciling items, ensuring that these don’t repeat or grow each month.

      • Understand the types of electronic transactions the company initiates.

      • Review transactions for duplicate monthly payments, such as two payments to the gas company in the same month.

      • Review online access and permissions with the bank. Limit who can initiate electronic transactions, require a separate authorization, and require separate log-ins for both users.

      • Require users to change passwords frequently.

      • Don’t brush off small transactions. Fraudulent transactions usually start small and grow over time when the culprit feels no one is looking!

      • Don’t rely on daily online transaction views. Sometimes detailed information or small transactions can be overlooked.

      • Work with the information technology (IT) department to ensure proper virus software is installed on all computers and updated regularly.

      • Trust your instincts! Changes in employee behavior or lifestyles are usually indicators.

Even if electronic bank transfers aren't typically used in a business, this doesn’t mean there isn’t an ability to do so. It only takes a few minutes to evaluate your structure and ways to strengthen your processes over this area. Become a subscriber to our blog for more suggestions on how to improve your internal controls. Regardless of your accounting needs, we take the time to understand your business, market, and culture. 

10 Keys to a Healthy Business

Kendra Williams is a Senior Manager with Meaden & Moore. In this role, Kendra assists in the planning of engagements, supervising staff, preparing financial statements and tax work, and working with clients to find solutions to problem areas, and developing ideas for growth. She works directly with numerous not-for-profit organizations performing both attestation and tax services. In addition to her not-for-profit experience, Kendra also conducts audits of 401(k) plans, pension plans and a wide variety of corporate engagements including manufacturing clients.

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