Strategies to Help Your Business Prevent Wire Fraud

Strategies to Help Your Business Prevent Wire Fraud

Authors:
Jeff Weeks, Senior Vice President and Chief Information Security Officer
Cheryl Friedenbach, Bank Secrecy Act/Anti-Money Laundering Officer

Business email compromise (BEC), wire fraud, and Automated Clearing House (ACH) fraud are some of the most common and costly cyberattacks targeting companies of all sizes. These wire fraud attacks exploit the human elements of communication and trust. Often, they involve impersonating a legitimate sender, such as a vendor, client or senior executive, and trying to trick the recipient into transferring money or disclosing sensitive information.

Preventing ACH and wire fraud requires a multi-pronged approach, including security measures, internal controls, and employee awareness. These best practices can help your business prevent attacks.

Security Measures to Implement

• Dual control: Implement dual control for high-risk financial transactions, like wire transfers and ACH originations. It requires two authorized individuals to approve each transaction.
• Segregation of duties: Separate responsibilities for initiating, approving, and executing financial transactions to prevent one person from single-handedly committing fraud.
• Strong authentication: Use multi-factor authentication (MFA) for access to financial systems and accounts.
• System monitoring: Continuously monitor your systems for suspicious activity, like unusual login attempts or changes in payment details.
• Network segmentation: Separate financial systems from other networks to limit the potential damage if a breach occurs.
• Data encryption: Encrypt sensitive data at rest and in transit to protect it from unauthorized access.
• Practice good cyber hygiene: Conduct penetration tests against your web-facing sites and against your internal network at least annually. Regularly scan your network to identify and patch any vulnerabilities. Join a cyber group that reports on current vulnerability exploits.
• Complex and unique passwords: Create complex passwords (upper and lowercase letters, numbers, and special characters); the longer the password, the better; change passwords frequently; and don’t use the same password on multiple websites.
• Passwords: Employees should not perform online banking, payroll, or other company financial transactions from their home computer, internet cafes, public libraries, or other untrusted networks.

Recommended Internal Controls

• Clear policies and procedures: Establish clear policies and procedures for financial transactions, including wire transfers and ACH payments. Document and communicate these procedures to all employees involved in processing payments.
• Regular review and reconciliation: Regularly review financial statements and account balances to identify discrepancies and potential wire fraud.
• Separate accounts: Fund specific accounts for daily transactions, e.g., payroll.
• Positive pay: Use positive pay for ACH payments to match incoming ACH transactions against a pre-approved list of authorized payments.
• Vendor verification: Verify the identity and legitimacy of vendors before adding them as payees or changing their payment information.
• Know your clients, vendors, and executives: Understand their typical transaction patterns and be wary of unusual requests, especially large or urgent wire transfers, instructions to wire to a different bank, etc.

Employee Awareness and Education

• Phishing and social engineering training: Train employees to identify phishing emails and social engineering tactics used by fraudsters that attempt to trick employees into initiating fraudulent payments.
• Red flags education: Teach employees about common red flags of ACH and wire fraud, such as urgent requests, changes in contact information, discrepancies in payment details, and pressure to rush transactions.
• Reporting suspicious activity: Encourage employees to report any suspicious activity or emails related to financial transactions to your security and fraud teams immediately.
• Open communication: Foster a culture of open communication where employees feel comfortable reporting concerns and asking questions about payment procedures.

Additional Protection Tips

• Do not rely on email for wire or ACH instructions: Always verify wire transfer instructions with a call to a known phone number or another trusted communication channel.
• Use dedicated stand-alone devices: Use separate computers for processing financial transactions and limit their use to financial transactions only. Disable email access and web browsing on these computers.
• Maintain updated software: Regularly update operating systems and applications to patch vulnerabilities exploited by scammers.
• Beware of impersonation: Scammers often impersonate executives or trusted contacts. Be cautious of requests originating from unfamiliar email addresses or phone numbers, even if they appear legitimate.
• Review your insurance coverage: Ensure your cyber insurance policy covers potential losses from ACH or wire fraud. Implement the required and recommended protections provided by your cyber insurance carrier and your financial institution.

If you do experience a business email compromise (BEC) or ACH or wire fraud, take these steps immediately.

• BEC: Cease all activity on the compromised device, contact your bank, and engage a forensic investigator.
• Wire fraud: Contact your bank immediately and request tracing of the funds.

By implementing these best practices and remaining vigilant, you can significantly reduce your organization's risk of falling victim to BEC and ACH or wire fraud. It also takes continuous effort and adapting your strategy to evolving threats to stay ahead of the curve.

For more information and best practices, please visit our Customer Security and Fraud Prevention Center and our blog.

About the Authors

Jeff has been with First National Bank of Omaha for more than 20 years and is currently the Senior Vice President and Chief Information Security Officer. The executive leadership and oversight provided by Jeff in the development, management, and execution of information security for FNBO enables the company’s ability to posture and protect private, personal information, and assets of the company’s clients, employees, and business partners.

Cheryl has been with FNBO for more than 25 years and is currently the Vice President and Financial Crimes Risk Officer. Cheryl and her team have designed a Financial Crimes Risk Program that is scalable to ensure the company is well positioned to address emerging risks and patterns of illicit activity while protecting the company, its customers and the communities it serves.