There are many ways to prevent fraud, from employee to customer fraud. The best way to reduce risk is to implement a fraud prevention system.
Ensure employees and customers do not share personal information online (such as birthdays, pet names, or addresses) and shred essential documents like credit card offers, pay stubs, and loan statements to stop identity theft. Also, consider implementing a secure mailbox to prevent mail fraud.
Know Your Customers
While fraudsters are always trying to find new ways to steal from customers, knowing your own is essential. This includes knowing how to help them avoid fraud. You can do this by providing a way for them to report suspicious behavior and advising them to protect themselves from identity theft. You can also provide educational materials to your customers, like a list of common scams and what to look out for.
Scammers often try to impersonate someone they think you trust, such as a government official, family member, charity, or company you do business with. To protect against these schemes, teach your customers to spot imposters and never send money or personal information in response to an unexpected request—a text, call, or email.
It would be best if you also made it difficult for fraudsters to access your customer data by requiring two-factor authentication or using challenge questions during transactions. These measures are easy for your legitimate customers to use, and they will thank you for keeping their information secure.
Fraud prevention is a constant race against bad actors. Still, you can stay ahead by strengthening your cybersecurity, educating your employees and customers, and investing in suitable systems and software. Fraud detection tools like machine-learning algorithms, a risk score, and a rules engine can reduce noise (false positives) while not missing actual fraud.
Train Your Employees
Your employees are your best defense against fraud, but you must know ways of preventing frauds to recognize it. One of the ways of preventing frauds is letting your employees be familiar with the different kinds of fraud your business is vulnerable to and understand how fraudsters target them.
One of the most effective ways to do this is by training your employees to spot red flags. This could include a company’s policies that require specific steps before making a purchase, like verifying two forms of ID or calling the vendor to confirm a change in payment terms. It could also be a policy to verify delivery information against packing slips before loading inventory or double-check invoices against inventory deliveries.
Additionally, employees must understand why fraud happens and how it may affect them personally. This will help them understand how to combat it by not committing it and helping them feel comfortable reporting suspicious activity to you.
It’s also helpful for your employees to know what a typical fraudster looks like because they don’t all look or act the same. One way to do this is by creating a profile of the common characteristics of perpetrators of each type of fraud, using data and statistics to bring it to life.
Invest in Fraud Prevention Software
As fraudsters continue to find new ways to exploit e-commerce weaknesses, business owners must take steps to protect themselves. Investing in fraud prevention software is one way to do that.
A good fraud prevention solution will be able to detect anomalies and suspicious behavior patterns that can indicate fraudulent activity. It will also be able to identify the devices fraudsters use so they can be blocked. Additionally, a good fraud prevention solution will provide insights into the most common types of fraud so businesses can take proactive measures to avoid them.
For example, many fraud detection solutions will use device fingerprinting to identify the unique characteristics of a given device. This can help prevent account takeover fraud, where bad actors access customer accounts and use them to make fraudulent purchases. Additionally, some fraud prevention tools will flag suspicious transactions for review by a human.
Another good way to help your customers avoid fraud is by encouraging them to monitor their credit reports throughout the year. Various applications and banking services will allow them to check their credit score for free and look for unfamiliar charges or changes to their personal information that might indicate fraud. It’s also good to encourage them to use secure sites when purchasing products or services online.
Conduct Regular Audits
Fraud continues to cost businesses millions of dollars each year. This is why it’s critical to invest in anti-fraud techniques and controls. These include accounts payable automation, fraud detection training, and ethics hotline implementation. These can help prevent fraud and reduce the monetary damages resulting from it.
The most important way to prevent fraud is to have strong internal controls and make these controls visible to employees. These controls should include auditing, establishing an ethics hotline, training for management and staff, and regular surprise audits with follow-up action on any results.