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Sponsored by: Chelsea Groton Bank
March 22, 2023

How to Protect Your Business from Fraud

Everyone knows business owners are juggling many things – from challenges caused by inventory, supply chain and inflation, to hiring and retaining a dependable team, to getting the word out about all your business has to offer, there are no shortages of tasks or concerns for the business owner.

Over the last several years, a new challenge – fraud – has risen to the top of the list of worries for many business owners. Did you know there was a 68% increase in the number of data compromises in 2021 compared to 2020 (Identity Theft Research Center), and from August to October 2021 alone, check fraud tripled (Evidence Based Cybersecurity Research Group at Georgia State University)? Losses resulting from cyber-attacks totaled over $72 million in 2021 in CT alone, up from $41 million in 2020 (FBI’s Internet Crime Complaint Center). Each year seems to be worse than the year prior as scammers get more clever. As a result, businesses are at an increased risk of financial loss on their business checking accounts from forged, counterfeit, and altered checks, and unauthorized electronic funds transfers and electronic manipulation of account information.

While there doesn’t seem to be an end in sight for fraud attempts, there are several best practices all business owners should implement to minimize the risk of financial loss to a business’ bank accounts due to fraud:

  • Assign responsibilities for your account to different individuals, and periodically reassign who handles which portion of accounting duties. For example,individuals who write checks should not reconcile your account statement.

  • Monitor your accounts closely and notify your financial institution, in accordance with the requirements of your deposit account agreement, of any errors or unauthorized transactions, or if you do not receive your periodic account statement. Business account holders have only 24 hours to catch and report fraud to their bank, so it’s critical that accounts are monitored and reconciled daily.

  • Restrict access to check stock, use tamper-resistant check stock, and destroy any check stock that you do not intend to use. Never sign blank checks.

  • Utilize your bank’s online system to set up alerts and, in real time, review transactions for activity that appears out of the ordinary. Review the front and back of check images paid through your account to ensure the information – including the endorsement – is accurate.

  • Never trust wiring instructions received through email. Cyber criminals hack email accounts and send convincing and sophisticated emails with fake wiring instructions, so it’s important to independently confirm wiring instructions in person or by phone with a trusted and verified phone number.

  • Obtain insurance coverage for fraud risks.

An additional safeguard that all businesses should consider is Positive Pay, a check and ACH fraud detection service. With Positive Pay, checks and ACH payments are automatically monitored so that any potentially unauthorized transactions are flagged for review before they post to a business account. This means that checks that don’t match a business’ check register, and electronic withdrawals that aren’t pre-approved by a business owner, won’t be able to clear against a business’ account without authorization. The service also features an Account Reconciliation function which helps businesses reconcile issued payments against their account balance. Another key benefit of Positive Pay is that in the event of a fraud incident, businesses don’t need to close and reopen their bank account, thereby avoiding having to switch over automatic transactions, order new checks, and other to-dos that can come in the wake of fraud.

While the rise in fraud is a huge concern, there are many online cash management tools nowadays that can help businesses protect their accounts and manage payment processes in a secure and efficient way. Chelsea Groton Bank proudly offers Positive Pay, as well as ACH Origination, online entitlements, real-time alerts, Smart Card and more. It’s important to check with your financial institution regarding the products and tools they have available to support you too.

About Chelsea Groton Bank

Based in Groton, Conn., Chelsea Groton Bank is a full-service mutually owned bank with over $1.5 billion in assets. Chelsea Groton Bank’s products and services include consumer banking, business banking, mortgage and business lending, cash management, financial planning and financial education programs. With 14 branch locations throughout New London County and a Loan Production Office in Hartford County, Chelsea Groton Bank also provides online and mobile banking, 24-hour telephone banking, and nationwide ATM banking for individuals, families and businesses. To learn more, please visit www.chelseagroton.com. Member FDIC. Equal Housing Lender. NMLS ID 402928.