A Guide to Mitigating Fraud Risk for Your Small Business Clients

Fraud and Financial Crime

Mary Elliott

Oct 1, 2020

The threat of financial fraud is real, no matter the size or scale of your organization. But sometimes small businesses are less able to recover from a loss than larger ones. Helping your small business clients learn how to identify the warning signs before they become a victim is critical. Small businesses (typically with access to fewer resources than larger businesses) may lack the means to adopt robust fraud prevention platforms. So, what can you do to help?

In addition to implementing the tools for fraud protection such as detection, AI capabilities, and machine learning models, it’s important for banks to educate employees and clients about the warning signs of fraudulent activity.

Understanding where threats can come from is critical. These are some of the most common forms of fraud that criminals use to target businesses:

Business Email Compromise (BEC)

BEC occurs when cybercriminals use fake emails that direct recipients to move funds, for example, diverting employee salaries into fraudulent accounts. This is accomplished by infiltrating the organization through spoofed emails disguised as coming from company executives requesting a change to direct deposit payroll accounts, typically owned by the scammer.  

Employee Fraud

Employee fraud is also a rising threat resulting from increased personal financial pressures exacerbated by the pandemic. In fact, 43% of financial institutions expect that employee fraud rates will significantly increase in 2020. Educating employees on fraud and risk management is key to spotting potential threats and reporting suspicious activity.

Mule Accounts

The term “money mules” refers to fraudsters engaging employees with the ability and account access to move money on their behalf. Mule accounts can be difficult for banks to track, but ignoring this type of fraud can lead to permanent loss of funds and damaged reputations.

Account Takeover (ATO)

When cybercriminals gain full access to corporate accounts, that's known as ATO. This unfettered access allows them to make unlawful transactions, add false employees to payroll, and steal valuable employee information. Advice from the American Bankers Association urges small businesses to partner with their banks to safeguard against ATO, by taking advantage of multiplatform services such as Positive Pay and those offering authentication capabilities.

Business Risk and Liability

Compared to consumers, businesses tend to have a shorter window when it comes to reporting fraud and taking successful action against it. Therefore, it is important for banks to work with small business customers to identify fraud attempts such as BEC and ATO before it is too late.

With fraud on the rise, knowing how to help small businesses defend against fraud can go a long way to prevent strained relationships with customers, financial losses, and more. Get informed about the latest on fraud and risk management and read more in the full ebook Protecting Your Small Business Clients from Fraud”.


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Mary Elliott

As a featured SmartPayments contributor and marketing intern at Bottomline Technologies, Mary Elliott brings a unique perspective with her diverse background in the technology, marketing, and non-profit industries. She is simultaneously pursuing a BS in advertising with a minor in technical writing at Kent State University.
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