Fraud mitigation is one of the most important aspects of any growing business or large corporation – because you have so much to lose. A bad case of fraud can lead to millions in losses, reputational damage, and regulatory worries – none of which looks good to an investor.
But a successful fraud mitigation solution can make the difference. Trustpair is a market-leading fraud prevention platform, and this article will help you understand how to mitigate the potential risks of fraud.
For more insights on how to fight fraud, download our latest fraud report.
What is fraud mitigation?
Fraud mitigation is just another way to say fraud prevention; it’s the steps that your company can take to deter fraudsters and reduce the effects of any fraud attempts. It goes hand in hand with detecting fraud.
Fraud mitigation is important because it helps to create an actionable strategy against fraud. Instead of a set of vague or generalized best practices, fraud mitigation officers can work with your risk assessment to audit the organization’s vulnerabilities.
Then, fraud mitigation is about implementing the right fraud detection, prevention, and response mechanisms to protect your business.
Why does your business need a fraud mitigation strategy?
A fraud mitigation strategy is a proactive approach – as opposed to the companies that sit back and wait for fraud to happen. Fraud trends show that scammers are getting more creative: a fraud detection strategy won’t cut it anymore.
Preventing fraud is necessary because of the effects of fraud – these effects have been getting noticeably worse within the last few decades. New data is showing that fraud cases have rapidly increased across all settings; b2b and among consumers.
Thanks to new technologies and online payment methods, fraudsters are able to exploit companies in more ways than ever. But a mitigation strategy focuses on matching detective controls with prevention plans to strengthen the vulnerabilities. This creates an impenetrable barrier around your organization and hinders fraudulent activities.
Five Tips to mitigate fraud
When it comes to fraud mitigation, here are the five tips that should help you develop the right strategy:
- Data monitoring
- Communication with employees
- Implementing fraud detection strategies
- Hiring the right people
- Using automation to minimize the risks
Data monitoring refers to the tracking of different metrics around your organization. This is important because when these measures change significantly, or you spot anomalies, they can signify suspicious behavior.
Some of the most important datasets to track include:
- Software analytics such as website data to check for a breach
- Third-party provider data – including their payment accounts to check for suspicious activity
- Approval rates for new contracts and payment requests, for example
You can successfully monitor different data metrics through automated platforms. For example, website plug-ins like Jetpack can track website vulnerabilities and protect your site from cyber attackers.
Alternatively, platforms like Trustpair continuously monitor and manage vendor data like account information, company data, and banking information. Not only do we confirm whether the details your vendor gives you match these records, but we can also check if the merchant appears on any blacklists, or is situated in a country that’s blacklisted. If a supplier requests a change in banking details, we automatically do a fraud control to make sure no felony is being committed.
Successful data monitoring can lead to better visibility and accountability, reducing the risk of fraud. In fact, the UK government identified data monitoring as the most powerful measure, and their primary strategy to counter fraud.
Communication with employees about fraud prevention policies
The effects of employee fraud awareness sessions are very well-documented. But you can go one step further – by detailing the exact fraud prevention policies and helping your people with the right response.
Last year, 42% of all fraud cases were detected through tips, and just over half of these came from employees themselves. What’s more, organizations that have properly set up fraud hotlines detect fraud more quickly and only lose a median amount of $100,000.
You can talk to employees about fraud prevention policies through:
- Setting up fake fraud scenarios to test employee reactions and develop response strategies
- Running through new fraud prevention protocols to get employees up to speed
- Answering questions about new software and systems put in place
- Making the punishments, fines, and consequences of internal fraud attempts clear
Implementing fraud detection strategies
Fraud detection solutions can alert your team to suspicious behavior before they actually lose any money. Fraud detection strategies can be implemented to spot anomalies in the data, find the red flags and put a stop to any attempts of fraud.
One example of a fraud detection strategy is Trustpair’s international account validation tool. Our clients use this to authenticate the details of potential new vendors and third parties. In just a few seconds, you’ll know whether these suppliers are who they say they are – or if they’re simply impersonators.
Once confirmed, the program then automatically and continuously validates these details to detect changes or payment information discrepancies – all signs that fraud might be in attempt. Fraud detection strategies like this aren’t time and cost-intensive – actions are automated while maintaining your company’s security levels. Contact an expert to learn more!
Hiring the right employees
In terms of fraud mitigation, hiring the right employees can make all the difference. Mitigate the risk of internal accounting fraud by hiring trustworthy people, with good references and results that can stand up to scrutiny.
In the fraud triangle, pressure is the first pillar that motivates people to commit fraud. But you can reduce this pressure directly by hiring enough people, ensuring they fulfill their requirements and don’t depend too heavily on specific results. Without the pressure of an imminent job loss, employees are less likely to perform suspicious activities.
It’s also important for new or junior employees to see good examples, set right from the top. Sometimes, senior leadership at corporations falls into the habit of disregarding all policies and procedures, as if they are above the law. 75% of employees admit to abusing their roles by committing expenses fraud.
But it’s important to set the tone early on to make it clear that any fraudulent act is wrong – and that if caught, the penalties are harsh. This way, you mitigate the risk of internal fraud and ensure that your people are on the lookout for the signs of suspicious behavior.
Using Automation to minimize the Risk of Fraud
Finally, automation might be the most robust method for fraud mitigation. It works through continuously monitoring your systems without the need for constant human insight – in fact, your people are only alerted when anomalies or threats are detected.
Harnessing the power of natural language processing, machine learning algorithms can use pattern recognition software to indicate any deviation from standards. This can help your team mitigate supplier fraud risks before they would be able to spot the unusual models themselves.
Trustpair is one of the top automation platforms for payment fraud prevention. We help you manage third-party risks by performing comprehensive payment audits, controlling traceability, and securing your data through smooth integration with your other processes.
Benefit from access to thousands of external databases and verify your third party vendors by working with Trustpair. Contact an expert to learn more!
Save your company from being compromised by fraudsters with solid fraud mitigation strategies. Fraud management is about controlling third-party risks, through monitoring your data, hiring the right people, and using automation programs to protect your personal information and your finances.