Supplier Payments Fraud: Aligning Technology & Process to Eliminate Risk Exposures

Payments fraudsters only target large companies and do not focus on check fraud anymore, right? Nothing could be further from the truth. No company is immune from payments fraud risk, and checks are still by far the most common payment type targeted for fraud. Payments fraud exposures arise from each person, process and system involved in a company’s payment process.

Companies need to identify and mitigate risk exposures relative to each payment type they leverage in paying suppliers: checks, wires, ACH, electronic payments, etc. Effective payments risk mitigation requires an education of all those involved in any way in payments processing relative to the risk they can or do introduce to the payments process, leveraging the right systems and controls, and aligning systems and people with processes that deliver financial controls and the right segregation of duties.

Payments risk exposures can arise from each person/party (internal or external) and system (internal or external) involved in creating and effecting a payment. The following represent common root causes for ineffective payment risk exposure management:

  • Manual intervention(s) in payments workflow.
  • Lack of visibility into the separation of duties in payments processing and authorization workflow.
  • Lack of adequate separation of duties in payments processing and authorization workflow(s).
  • Lack of a detailed audit for participant activity in payment processing and authorization for each disbursement.
  • Lack of transparency and centralized view of bank account activities.

Payments Risk Mitigation: The Bottom Line

Despite advances in technology, companies of all sizes across all industries continue to experience payments fraud at an alarming rate across a multitude of payment types. Companies need to identify the specific payments risk exposures they face and leverage people, process and technology to mitigate each exposure.

The foundation of effective payments risk mitigation entails:

  • Educating each employee involved in processing payments relative to how they directly and indirectly impact payment risk exposures.
  • Leveraging technology to minimize manual data entry and manual intervention in payments related workflow.
  • Leveraging technology that optimizes end to end payments processing visibility.
  • Leveraging technology that automates workflow.
  • Leveraging technology that automates controls and policy compliance.
  • Minimizing the number of people involved in payments processing consistent with the right segregation of duties.
  • Minimizing the number of systems involved in payments processing.

Ernie (@ErnestHumphrey) currently serves as the CEO of 360 Thought Leadership Consulting. He has diverse industry knowledge as a seasoned corporate practitioner, a leader at the Association for Financial Professionals (AFP), and as a driving force behind the development of the largest online community for senior level financial professionals (Proformative). Ernie is also a Certified Treasury Professional.