How to implement effective fraud monitoring in your business?

fraud monitoring

Last modified on October 31st, 2023

In 2022, 56% of US companies were targeted by at least 1 fraud attempt. More than ever, it’s increasingly necessary for companies to set up an adequate fraud monitoring strategy.

Fraud can have long-lasting impacts: besides direct financial losses, there is also a risk of reputational losses. What monitoring measures can you set up in order to protect your organization?

Trustpair allows you to efficiently monitor fraud in your business by sending real-time warnings in case of fraudulent attempts and blocking any suspicious payment. It helps to safeguard your business against B2B payment fraud. Contact an expert to learn more!

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What is fraud monitoring (and why is it important?)

Fraud monitoring in business, a definition

Fraud monitoring is the process of monitoring the activity of your clients and third parties for fraud. It’s done through a mix of manual surveillance and automated tools, the latter being more efficient to spot suspicious patterns.

It’s especially used in the following industries:

  • Banking,
  • Cryptocurrencies,
  • Insurance,
  • Gaming.

To prevent banking fraud, for instance, financial institutions look at the actions taken by their users when they’re connected to their accounts. If someone logs in, adds a new beneficiary to the bank account, and sends a transfer straight away, it might send a fraud alert to the financial institution.

Monitoring for online fraud means being able to detect any suspicious activity predicting fraud. Each organization has its own set of red flags that spot fraudulent attempts.

Even though it’s thoroughly used in the sectors highlighted above, all companies benefit from fraud monitoring. As you deal with clients and third parties, you are at risk of fraud as well.

From account takeover to credit card fraud, fraud risk is omnipresent nowadays. Fraud detection methods must be used proactively to keep up with new fraud trends. By using analytical models, fraud detection software can help spot anomalies in a vast amount of data – raising the alert before it’s too late.


The high stakes of fraud monitoring

In 2020, the Federal Trade Commission received 2,2 million consumer fraud reports. One of the most common frauds is identity theft. It happens even to individuals who use credit monitoring and credit freeze solutions (like Equifax or Transunion).

Corporate fraud is also on the rise: 56% of businesses were subject to fraudulent transactions in 2022.

Fraud happens with companies and non-profits alike. CEO fraud, vendor fraud, money laundering… they’re all types of fraud that can happen to you too.

It’s not a matter of if, but when fraud will happen. Which is why your organization needs fraud monitoring.

Fraud monitoring helps detects fraud early. It’s a necessary element of your third-party fraud risk management strategy, alongside fraud prevention. Not only does it protect your company from the risk of fraud, but it’s also a requirement in many countries.

For example, payment service providers in Europe must meet with the Payment Services Directives (PSD2), which includes Strong Customer Authentification (SCA) and transaction monitoring.

While this isn’t mandatory in the US just yet, this is the direction things are taking with global governance. Right now, if you do business with any European country, you’re already subject to those regulations.


The best fraud detection strategies

We know fraud monitoring is important – the next question is: how do you set it up? Keep reading to learn about the best fraud detection strategies for your organization.

Due diligence with suppliers and partners

The first step in monitoring fraud is knowing who you’re doing business with. Identity verification applies to your clients, but also to your suppliers and partners.

The Know Your Supplier (KYS) and Know Your Customer (KYC) regulations are here to protect you as well as your customers from fraud. They’re mandatory in the US and many other countries.

Bank account number (Iban) validation is a useful way to vet your third parties – as you start a business contract with them, but also regularly during your relationship. That’s what Trustpair helps you do by running automated audits of your this-party credentials.

By checking the bank account details you have are indeed the ones of your suppliers, you can prevent identity fraud. Spoofing (or impersonating someone else) is one of the many ways scammers carry out fraud.

Regularly checking the credentials of your third parties mean you know you are actually paying the people you think you are – not a scammer who hacked into their (or your) system. Good due diligence will help protect you from being a victim of identity theft, or fraud in general.


Regular fraud prevention training

Effective fraud monitoring requires an all-hands-on-deck approach to fraud. Everyone in your company must know about the risk of fraud, and know how to detect it.

For example, they should be able to:

  • Recognize a phishing email,
  • Know what malware and virus software is,
  • Safeguard their account number and passwords,
  • Distinguish counterfeit from legitimate communications,
  • Know when to contact law enforcement or your local police to report fraud.

Being able to spot fraudulent activities as they happen will reduce your risk of being a victim of fraud.

Your teams should also be aware of the danger of revealing sensitive information online – data mining for financial information is part of a fraudster’s skills.

You achieve this by giving your employees ongoing training opportunities. It’s not enough to have them sit through cybersecurity training during their onboarding: your employees must be kept up-to-date with the latest scams. Regular training also helps keep the matter a priority in everybody’s mind.

One of the ways to do this is to do fraud drill alerts in your organization. Your internal control or IT department can for instance simulate identity fraud with some of your employees to gauge their reactions. You can also decide to send fake phishing campaigns to see what your results are company-wide.

That’ll help you evaluate where you stand, and what other measures you need to set up to protect yourself against fraud. Be careful to do that only sporadically, as crying wolf too often might be counterproductive.


Segregation of duties and the 4-eye principle

As your company grows, your processes tend to become more complex. That’s one of the reasons fraudsters target medium to large companies: they benefit from the lack of internal clarity (and they also have more assets). That becomes even more of a problem when your company does business internationally.

If you want to counteract this, you need to set up clear workflows for your key operations, like:

  • Payment campaigns and approvals,
  • Payroll,
  • Purchasing,

You want to carefully establish the scope of duties for each employee by allocating them different authorizations. Segregation of duties lowers damages in case criminals manage to steal personal information; it’s added identity theft protection. Breaches can be controlled more easily when data is compartmented.

It also helps with fraud protection to set up a double control method, like the 4-eye principle. It means that for each sensitive operation, two sets of eyes are needed for approval. Two people are less likely to be compromised at the same time – unless you’re dealing with advanced fraud.


Why is automation the best way to monitor fraud?

Fraud detection software is more efficient

Manual control mechanisms tend to be error-prone and time-consuming. Fraud detection software makes your fraud detection process more seamless and more efficient.

While humans are great at performing high-value tasks like strategic thinking, repetitive and in-depth research tasks are best left to automated tools. In this case: fraud detection tools.

It becomes quickly tedious to check your third-party credentials before any payment is sent — which is what should happen to protect against fraud effectively. There is a matter of time of course, but also of depth: how can you access the latest information about your suppliers? Where do you go to check ownership of their bank account?

Software tools are also much better at spotting patterns. They can process huge quantities of data and create predictive analytics, which makes them the perfect help for effective fraud detection.

Machine learning now gives us the ability to compare normal behavior to suspicious ones, therefore aiding with fraud detection and prevention. Any high-riskhigh risk activity is detected and flagged automatically, in real time. It also helps decrease the risk of false positives, which are bad for your company in the long run.

Learn how to choose the best automation tools in our dedicated white paper.

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Fraud monitoring and prevention, all in one tool

Effective fraud management includes fraud monitoring, but you should also have a plan to prevent fraud in the first place. It’s the difference between hearing an alarm when thieves come into your house, and making sure your door is locked in the first place.

Fraud monitoring isn’t enough on its own, you need to be proactive. One of the ways to do this is to use an anti-fraudanti fraud solution. A detection solution like Trustpair sends you fraud alerts when fraudulent activity is spotted, but also prevents fraud from happening.

We specialize in third-party fraud, a huge access point for scammers of all sorts. We check your suppliers’ credentials automatically and in real-time against national and international sources. It’s especially useful for hard-to-find data about oversea merchants.

Our software both prevents and detects fraud, blocking any suspicious transaction before it happens. We minimize fraud by ensuring you’re efficiently protected and detect any fraud attempt if it does happen.


Key Takeaways:

  • Fraud monitoring is helpful to spot any predictive pattern that could lead to fraud. It’s a necessary component of your fraud prevention and detection strategy.
  • To completely stop fraud, you need to use fraud detection tools like Trustpair, which does real-time checks of your third-party credentials.


Fraud detection is done by monitoring your activity: through due diligence, training your employees, and using software detection tools. Machine learning is a great way to spot suspicious activity. Tools like Trustpair ensures you detect fraud risks early.

Identity theft and phishing attacks are basic types of fraud. They cause losses of their own, but can also lead to more advanced fraud schemes that will further hurt your organization.

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