How can you effectively prevent fraud in business?

how to prevent fraud in business

Last modified on May 24th, 2024

A recent report told us that for every $1 lost to fraud, e-commerce and retail businesses in America are losing $3.75 over the lasting effects of these scams. Business loyalty is a fickle thing. Once suppliers and third parties spread the word about your business, it becomes harder to recover the company’s reputation. That’s why it’s crucial to know how to prevent fraud in business and set up effective strategies.

Trustpair prevents fraud in business by conducting ongoing & automated account validation and blocking suspicious payments. Contact an expert to learn more.

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What are the main types of fraud in business?

When talking about the most common types of fraud in business, the usual suspects are:

  • Wire fraud: for example, cybercriminals send an unauthorized push notification in real-time to get you to approve a payment into their account
  • CEO fraud: thieves impersonate your senior leadership and pressure employees for a money transfer or access to sensitive information
  • Business email compromise (BEC): criminals send a fake email, often with a link that downloads malware onto your system, thus gaining access to defraud
  • Check fraud: checks are the easiest payment method to forge, either through the signature or by changing the dollar amount
  • Invoice fraud: organizations pretend to be your actual merchants, changing payment account details to their own
  • Money laundering: money made illegally is ‘cleaned’ through the business to make it appear legitimately earned

Fortunately, for each type of financial fraud in business, effective strategies for fraud prevention exist.


How can you effectively prevent fraud in business?

It’s easy for businesses to kind of ‘spray and pray’ when it comes to fraud prevention strategies, throwing every kind of idea and hoping that one or two sticks.

But the most effective strategies for preventing fraud losses have a few things in common. Notably, they’re logic-based, raise awareness among your team members, and put measures in place specifically.

Here are some of the most effective strategies:

  1. Have solid internal control procedures
  2. Put cybersecurity measures in place
  3. Continuously train your employees
  4. Implement segregation of duties
  5. Use automation software

Have solid internal control procedures

Solid internal control procedures build accountability into your internal systems, and can actually help with fraud detection as well as prevention.

While you’ve probably got standard operating procedures (SOPs) set up across every department in the company, internal controls are slightly different. They focus on which members of staff are approved to take specific actions and encourage traceability. This means that external auditors should easily be able to determine what happened at any given moment.

An example of an internal control procedure focused on preventing card fraud is the payment approval process. Here, you could send a request to two senior members of staff when the payment is above $10,000, for example. Both of these employees must separately approve the payment (typically through an online portal that can track their actions) before your vendor or supplier is paid.

The main effects of such solid internal controls are twofold:

  1. Deterrence: with high levels of individual traceability, cases of internal fraud are likely to reduce. This is because one part of the fraud triangle, opportunity, is missing – so operating fraudulently with internal controls in place would be high-risk and difficult to get away with.
  2. Accuracy: with clear instructions on how to follow the rules, it’s less likely for your people to make mistakes that fraud perpetrators can exploit. Therefore, this also reduces the risk of fraud.

Put cybersecurity measures in place

Cybersecurity measures are automated surveillance software that can work with your pre-existing programs. They help to detect and prevent fraud by blocking access to your systems, verifying identities, and card information, and securing sensitive or personal information. Cybersecurity measures can also help secure your bank account from those trying to steal.

One example of a cybersecurity measure is an upgraded email firewall or spam filter. In 2021, over 319 billion spam emails were received every single day. Traditionally, standard spam filters are unable to contextualize picture content or identify redirected links, so these are sent straight through to the receiver.

But applying a spam filter to the company email provider can help clean out phishing emails, which are often used as the channel to perpetrate CEO fraud or invoice fraud. Plus, you might receive a fraud alert for any strong cyber attacks on the business in order to respond in real time.

The impacts of better cybersecurity measures have been widely documented, but primarily, they provide peace of mind. Without the need for human intervention or reliance on your internal staff to follow specific instructions, cybersecurity measures can be programmed to run in the background, securing your business.

Continuously train your employees

Fraud awareness training sessions are one of the most popular strategies in the fight against fraud. Most companies hold these in order to make staff aware of new techniques and encourage employees to spot the signs of suspicious behavior. However, they can also be used to imitate fraud cases and develop response strategies to mitigate the fallout.

For example, in 2020, it would have been useful to run a session about gift card scams. The scam happens through CEO fraud, where impersonators send an email to staff and ask them to purchase $1000 worth of gift cards on the company card, for example. Then, the employee is told to email the voucher codes, where the fraudster is able to make off with the money by spending it in real-time.

The gift card scam became incredibly popular in 2020 due to the volume of people who began working from home. It was much harder for staff to verify these kinds of requests since policies for remote working were not well-established, so many became victims of fraud.

But the effects of regular anti-fraud training sessions for employees are huge. 56% of teams claim to carry out fraud awareness training at least once per quarter. Only 15% hold monthly sessions. Since the world of business fraud is so fast-moving, this could be the difference between protection and falling victim.

Implement segregation of duties

Segregation of duties refers to the separation of finance activities between different staff members. It should discourage internal fraud attempts, since the segregation of duties holds team members accountable, and makes their actions traceable.

This is also known as the four eyes principle.  Two sets of eyes are required to approve the documents or actions in question. An example of one finance process which benefits from the segregation of duties is supplier vetting during procurement.

Here, it’s useful for more than one person to consider the options in order to prevent kickback schemes. This typically involves the bribery of an executive with gifts or even direct payments by a potential supplier in order to win contracts. But the segregation of duties always involves at least two people in the process, reducing the risk of a successful kickback.

In general, implementing the segregation of duties across processes in finance allows your department to run smoothly. On top of fraud prevention, it can help avoid mistakes and spread responsibility throughout the entire department.

Use automation software

Finally, automation software that’s focused on fraud prevention uses machine learning and natural-language processing (NLP) models to identify suspicious behavior in real-time. Anti-fraud platforms can work in different ways, but all aim to monitor all payments before they are executed to detect an anomaly and monitor supplier credentials.

Trustpair is a good example of financial fraud detection software. It’s the leading provider in the fight against payment fraud. Specifically, we authenticate and monitor third party data throughout your entire payment chain. Then, we automatically block payments to suspicious entities in order to protect your business against payment fraud.

The benefits of using automation software for businesses to prevent fraud are overwhelming. Here are some of the most impactful:

  • Easily prioritize risk management with a clear picture of fraud risks
  • Significantly cut the time it takes to validate third parties
  • Integrate with current processes to work more efficiently
  • Gain access to the widest external data sources
  • Eliminate the risk of fraud

Working with Trustpair has so far led to 0 cases of fraud or theft for our clients. Demo the platform to see how it works for yourself.

Learn more about corporate fraud in our latest fraud report

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To conclude:

Protect against fraud attempts by upgrading your cybercrime measures, training employees, implementing best practices for internal controls, and validating account information. Don’t become the next business fraud victim. Prevent losses by knowing the risks and securing your company from the red flags.


Anti-fraud platforms like Trustpair are the most effective way to prevent payment frauds from occurring. We block fraudulent activity by providing consistent merchant authentication, meaning scammers can’t get away with requesting to change payment details. This prevents your payment system from being compromised.

Whether you’re trying to prevent identity theft that leads to credit card fraud or online fraud like a data breach, a good fraud protection strategy involves:

  • Identify fraud risks with a risk assessment (including third-party risks)
  • Detect suspicious activity through automated software
  • Prevent attempts to defraud through good internal controls and implementing best practices

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