Financial management: how to combat transfer fraud?

Like all corporate finance departments, you face a formidable threat: transfer fraud.

More and more sophisticated techniques are being used to extort money from companies.

In this article we explain how to recognise a transfer fraud and how to protect yourself against it with the help of Trustpair.

Bank transfer fraud

Fraud: a real scourge

Fraud is one of the main threats to a company. A reading of the Euler Hermes study shows that the figures for transfer fraud are frightening:

  •  1 in 4 companies have experienced fraud
  •  70% of companies have been targeted by attempts
  • 1 in 3 businesses suffered a loss of more than 10k in 2019
  • 10% of companies suffered losses of more than €100K
  • 48% of frauds are frauds involving fake suppliers
  •  50% of companies have seen their business partners fall victim to fraud

Fraud figures have been similar since 2017, proof that the pressure on French companies is far from weakening. On the contrary, the success rate of frauds is slightly increasing: "27% of the companies surveyed suffered at least one proven fraud in 2019, which is a slight increase (26% in 2018)", still according to the Euler Hermes study.

In this context, it is essential to learn to recognise potential frauds in order to protect oneself effectively. 

What are the main types of money transfer fraud?

Money transfer fraud has many faces. However, they can be grouped under several main categories. Most frauds involve identity theft. Here is a clear overview of what you can do to defend yourself against it:

Fraud against the President

It is also called FOVI (False Transfer Order). First, the fraudsters gather data on the company: the list of employees, managers and the banks used. They then impersonate a manager and instruct an accountant or bank officer to make an "urgent" and "confidential" transfer in his name. Once the funds have been transferred, they are transferred to various foreign bank accounts and become irrecoverable.

False supplier fraud

Typically, the fraudsters impersonate a company's supplier and then inform the company of a change in bank details. Subsequent payments will be made to the pirate account, until the bank account disappears altogether.

False supplier fraud can also involve diversion of goods, where the pirates report a change in delivery location.

Internal fraud

As the name suggests, internal fraud is committed by one or more employees within the company. It includes bribery, intentional misrepresentation, intentional disclosure of confidential information, embezzlement, expense fraud, theft and extortion. The faces of this fraud are many!

Cyber fraud

Cyber frauds are money transfer frauds in which the computer tool is trapped. Two techniques are particularly widespread. Ransomware consists of hacking into a company's network, encrypting its data and returning it for a ransom. Phishing is a fraudulent email inviting people to click on a link that will allow the hackers to access the company's information.

How effective are the measures to protect against fraud?

The reason fraudsters have such a high success rate is that they know how to exploit loopholes in companies. Despite all the goodwill and processes put in place by financial departments, ensuring a high level of protection is complex.

In fact, to protect themselves against transfer fraud, companies mostly resort to manual controls. TheFraud 2021 study conducted by Trustpair and Accenture reveals that the most commonly used techniques are double-signature (78%) and counter-calls (66%). 

But in the face of the increasingly sophisticated techniques put in place by fraudsters, these barriers are not always sufficient to detect and thwart fraud. In addition to being fallible, these systems are time-consuming and cumbersome to apply. It is therefore necessary to find alternative, more effective solutions to protect one's business in the long term.

Protecting your business against money transfer fraud?

In order to thwart bank transfer fraud attempts and protect your company in the long term, there are several things you should do:

  • Identify the risks to which you are exposed, by learning about existing frauds and how they operate.
  • Train and educate your employees so that they can prevent risks effectively.
  • Digitalising and automating your control processes in order to increase your level of security against the risk of fraud

Fighting fraud with Trustpair

Trustpair helps the financial departments of small and medium-sized companies and large groups to protect themselves against transfer fraud. Our SaaS solution allows you to control the company ID/bank account combination of all your third parties, so that you can always be sure that you are paying the right person to the right bank account.

To ensure reliable data, the solution is connected to various European and global reference data sources. Financial departments are then able to control all of their third-party data from purchase to payment, and to :

  •  Automatically check third party bank details;
  • Continuously audit its third-party repository;
  • Receive real-time alerts in the event of erroneous data or detected anomalies;
  • Secure each payment campaign for optimal security.

A project? Any questions? Talk to the Trustpair experts

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