With remote work here to stay, A/P has to work harder to verify crucial information, such as vendor bank account numbers.
Unfortunately, fraudsters are also working hard. They’ve been busy exploiting dispersed Finance teams’ increased reliance on email for routing invoices for approval, getting payments approved and collecting vendor bank account info.
An easy-to-miss attack for stealing from businesses like yours is hijacking unencrypted email threads to request switches from vendor bank accounts to fraudulent ones. And there are various business email compromise breach tactics being deployed.
According to the Association for Financial Professionals (AFP), an alarming 71% of all organizations were targets of fraud attacks in 2021.
In addition, 58% of A/P leaders surveyed by IOFM said their fraud risk has increased since 2020 and 40% of all A/P departments have experienced multiple payment fraud attempts in the past year.
“Before the pandemic, fraud was already at an all-time high. And today, nothing has changed,” A/P thought leader Marc Brousseau commented during the IOFM webinar “How to Reduce the Risk of Payment Fraud through the Automatic Verification of Bank Account Ownership.”
What Finance can do right now
AFP identified three common strategies that your peers are effectively carrying out to take quicker proactive action against fraud:
- Standardizing processes across payment modalities (e.g., 60% of organizations are using positive pay to protect against check fraud and ensure ACH transactions are legit)
- Developing controls for remote working, and
- Reconciling payments daily with the help of A/P automation.
And believe it or not, your supplier onboarding and registration process can also be leveraged to mitigate the elevated risk of financial loss, along with possible compliance, business reputation and litigation risks.
Can vendor bank account authentication be automated too?
When vendor self-service and vendor relationship management SaaS applications company Financial Operations Networks (FON) asked A/P pros to identify where their greatest risks in vendor onboarding are, one area really stood out:
- 70% said fraudulent vendor bank account info
- 15% said accidentally onboarding a business or individual that’s sanctioned by the U.S. government/on the OFAC watchlist
- 5% said incorrect Taxpayer Identification Numbers (TIN), and
- 10% said something else.
A poll of webinar attendees revealed that almost half (49%) of your Finance pro peers believe their vendor onboarding process has become riskier over the last two years.
During the webinar, FON founder and CEO Phil Binkow said that manual verification of vendor details – including time-consuming internet searches and phone calls, and paper forms – is one of the biggest fraud risks that Finance needs to shore up. “You could almost categorize it as a built-in exception item for every single bank account that they want to pay electronically,” he commented.
FON research found that 72% of businesses manually onboard their vendors. Perhaps they’re unaware that verifying vendor bank account details and other supplier information can be done automatically with software solutions that are on the market that integrate with master vendor files and enterprise resource planning systems.
With vendor verification automation, the following information gets authenticated in real time:
- Account name
- Street address
- Bank account number (and that the account is open and in good standing)
- Routing number, and
- TIN.
“And then, if there actually is a discrepancy, there’s the opportunity – and it’s available – for further review, but much, much faster and much more thoroughly than ever before,” Binkow said.
Meanwhile, 40% of organizations reported they were planning to deploy a solution to automate validation of their vendor bank account details within the next 18 months.
“What we’re seeing now is more and more companies are prioritizing upgrading their onboarding and their verification due to the increased awareness by senior management (of) fraud,” Binkow said. “And there’s so much technology being driven into making payments more cost-effective, more timely, more efficient, that the fraud issue is a part of that discussion.”
Next step
With automation of verifying vendor bank account ownership now a reality, the potential reduction of data entry workflows is particularly welcome news for companies facing potential staffing shortages in Finance.
But you may get more bang for your buck if the platform you use is augmented with an online vendor portal, which makes it easier for vendors to electronically submit W-9s or W-8s, while also providing the vendor with increased visibility into invoice and payment status and their onboarding status.
Vendors will also appreciate that portals are more secure than email for submitting their precious bank account information.
Portals are something 40% of organizations already have, and another 40% plan to get one within the next 18 months, according to FOM.
“They’re a hot topic these days,” Brousseau noted. “(Portals) can also securely archive the information and serve it up to decision makers, so they’re able to get suppliers onboarded faster.”
For your peers that say portals are expensive, hard to use and difficult to implement, Binkow said, “That probably was true four or five years ago, maybe three years ago. Today, it’s not so true anymore.”
