Cybercrime is at an all-time high, with payment fraud posing a significant threat to organizations of all sizes. Controllers play a crucial role in safeguarding company assets and ensuring secure transactions.
As a controller, you should familiarize yourself with the sophisticated attacks used to target financial systems so you can proactively mitigate risks and protect company funds.
Common Types of Payment Fraud
The first step to prevention is understanding the bad actors that will attack your business. Some of the most common forms of payment fraud include the following:
- Business Email Compromise (BEC): Attackers impersonate executives, vendors, or employees to manipulate fund transfers
- Vendor Fraud: Fraudsters create fake vendor accounts or hijack legitimate invoices to divert payments
- Phishing and Social Engineering: Cybercriminals use deceptive emails or calls to trick staff into sharing their credentials or approving fraudulent transactions
- Check Fraud: Altered or counterfeit checks continue to be a risk despite the widespread use of digital payments
- Unauthorized ACH and Wire Transfers: Attackers gain access to financial systems to initiate unauthorized transfers
- Payroll Fraud: Fraudsters create fake employee profiles or alter direct deposit details to steal salaries
Bad actors may use several of these strategies simultaneously. For instance, a cybercriminal may use BEC tactics to facilitate an unauthorized ACH transfer.
The Hard Truth About Payment Fraud
The Association for Financial Professionals (AFP) conducts an annual Payments Fraud and Control Survey Report. According to the 2024 report, four out of five organizations experienced payment fraud attempts/attacks in 2023. This represents a 15-percentage point rise compared to 2022. AFP researchers also discovered the following:
- 65% of organizations faced check-based payment fraud attempts, which is the most commonly used payment method in fraud attacks
- 20% of respondents experienced fraud related to interference with the United States Postal Service
- ACH credits surpassed wire transfers as the most vulnerable payment method for business email compromise fraud
- 41% of organizations recovered at least 75% of lost funds
- 30% of businesses did not recover lost funds
Payment fraud is becoming more common, and bad actors seem to be shifting their focus to ACH-based payment methods. Therefore, your threat mitigation efforts should also focus on securing digital and electronic payment channels.
How to Secure Payments and Stop Fraudsters
So how can you push back against opportunistic fraudsters? Consider taking the following actions.
Implement Strong Internal Controls
Robust internal controls help prevent unauthorized transactions and detect suspicious activities before they translate to lost money. You should require dual authorization for payments exceeding a set threshold. It’s also important to segregate duties so that no single employee can initiate and improve high-value transactions.
Regularly reconcile accounts to identify discrepancies and ensure your internal controls are working. Monitor vendor activity for anomalies, such as a sudden change in payment details or an invoice for an unusual amount.
Enhance Vendor Verification
Vendor fraud is one of the most difficult forms of payment fraud to stop. Therefore, it’s vital that you verify vendors through a thorough due diligence process.
Confirm payment details directly with vendors using known contact information. If you have a question or concern about an invoice or payment request, call your contact directly for verification. Do not rely solely on email, especially when addressing suspicious activity.
Strengthen Cybersecurity Measures
Cybercriminals often target weak defenses or unknowing employees to gain access to your financial systems. Work closely with your IT team to:
- Implement multi-factor authentication for financial transactions
- Enforce strong password policies and limit who has access to payment systems
- Implement firewalls and encrypted communications
In addition, you must provide your employees with training and education so they can recognize phishing and social engineering attempts. Your team members are one of your greatest assets for fraud prevention. However, a single uninformed employee can be a major liability.
Monitor and Audit Payment Transactions
Real-time transaction monitoring allows you to detect and stop fraudulent activities. Artificial intelligence-driven fraud detection tools can flag suspicious transactions and give you an opportunity to intervene.
Fraud detection platforms also allow you to set up custom alerts to detect suspicious activity. For instance, you can enable alerts when a vendor changes its bank details or makes an unusual payment request.
Develop a Fraud Response Plan
The unfortunate truth is that fraudsters are very good at what they do, which means you need a plan for dealing with the aftermath of a successful attack. Ensure that everyone knows what their responsibilities are so they can mitigate the company’s losses and work to recover funds. Regularly review and update your response strategies to ensure they address the latest threats.
Insulate Your Business From Fraud in 2025
Cybercriminals are refining their tactics. In response, financial leaders must take a proactive stance in preventing payment fraud. Implement advanced fraud detection strategies and tools so you can effectively find and address suspicious activity before it leads to financial losses.
