Developing an Employee Education Program to Mitigate Payment Fraud Risks

Payment fraud remains a significant threat to organizations of all sizes.  And bad actors have set their sights on accounts payable (AP) departments because of the sensitive financial information that they handle.  Developing a robust employee education program is crucial to mitigating the risks of falling victim to payment fraud.  This article outlines the vulnerability created by traditional approaches to processing and paying invoices submitted by suppliers, the critical role of AP staff in mitigating the risk of payment fraud, and the steps to build an effective payment fraud prevention training program.

Common payment fraud vulnerabilities

Traditional AP processes create numerous opportunities for fraudsters to exploit weaknesses.

• Human error. Manual processes are inherently prone to mistakes, such as data entry errors, incorrect invoice approvals, or misfiled paperwork.  Fraudsters can exploit these errors by submitting fraudulent invoices that may go unnoticed due to the volume of transactions or by manipulating AP staff into making mistakes that benefit the fraudster. 

• Delayed detection. The manual nature of traditional AP processes often results in delayed detection of fraudulent activities.  Fraud may not be identified until a thorough audit is conducted, which could be weeks or even months after the fraudulent transaction has occurred.  This delay allows fraudsters to continue exploiting the system undetected. 

• Limited oversight. Manual processes lack the real-time monitoring and oversight needed to spot fraud.  Without automated alerts and data analytics, it is hard for staff to keep track of every transaction and spot suspicious activities promptly.  This creates fertile ground for fraudsters to operate, knowing that the chances of being caught in real-time are slim.

These vulnerabilities put the onus on AP staff to help identify anomalies and suspicious activity.

The role of AP staff in mitigating fraud risk

Frontline AP staff play a critical role in safeguarding an organization against payment fraud.  An AP pro’s daily tasks place them in a prime position to detect and prevent fraudulent activities.

• AP staff are responsible for ensuring the authenticity of invoices and payment requests.  AP staff must cross-check invoice details against purchase orders and delivery receipts to verify the legitimacy of a transaction.  They should confirm that payment requests are from legitimate vendors.  They must ensure that all invoices and payment requests have the required approvals from designated authorities before processing.  And AP staff should verify the accuracy and completeness of supporting documentation such as delivery receipts.

• AP staff are critical to identifying red flags that may indicate fraudulent activity. AP staff should keep an eye out for unusual patterns, such as sudden increases in a supplier’s invoice amounts or frequent changes in bank account details.  They should pay close attention to invoice details, such as discrepancies in dates, duplicate invoice numbers, or altered vendor details.  AP staff must be alert to suspicious emails or phone calls requesting changes to bank account details or urgent payments, often indicative of phishing schemes.  And organizations count on AP to spot payment requests that deviate from normal business practices, such as requests for payments to foreign bank accounts without prior notice.

• Effective fraud prevention relies on AP staff to report suspicious activities.  To mitigate potential fraud risk, AP staff must adhere to established procedures for reporting suspected fraud, including who to notify and how to document their concerns.  Staff should immediately report any discrepancies or suspicious activities to minimize losses and initiate fraud investigation protocols.  And staff should work with fraud prevention and security teams to provide detailed information about suspicious activities, aiding in the resolution of potential fraud cases.  AP staff also must maintain the confidentiality of reported incidents to prevent tipping off potential fraudsters and to protect the integrity of the investigation.

AP staff are integral to an organization’s defense against fraud.  Through diligent verification, keen detection, and prompt reporting, AP staff can help safeguard the organization’s financial resources.

Deficiencies in current training methods

Many organizations fall short of adequately training their staff to combat payment fraud.

• Lack of awareness. At many organizations, training programs don’t comprehensively cover the diverse and evolving nature of payment fraud schemes.  In other cases, fraud prevention training may not be given the same level of importance as other training areas, leading to a lack of focus on this critical issue.  And training materials may not be regularly updated to reflect the latest fraud trends and tactics, leaving employees unprepared for new threats.

• Inadequate training. In some organizations, staff training materials may not keep pace with the rapidly changing landscape of payment fraud, making them less effective.  Training programs also may focus too much on theoretical knowledge without providing practical, real-world examples and exercises.  And conducting training as a one-time event rather than an ongoing process can result in knowledge gaps and decreased retention over time.

• Poor engagement. Complex and jargon-heavy training content can be difficult for employees to understand and apply in their daily work.  Additionally, training sessions that rely solely on lectures or presentations can fail to capture employees’ interest and attention.  And without interactive elements, such as quizzes, workshops, and simulations, employees may not fully engage with the training material or retain the information.

These deficiencies can increase an organization’s vulnerability to payment fraud.

How to build a fraud training program for AP

An effective training program should be well-structured, engaging, and regularly updated.

Here’s how to build a staff training program that will mitigate your organization’s risk:

• Know where you stand. Evaluate your existing training methods and identify gaps.

• Establish clear objectives. Define what the training program aims to achieve, such as increasing awareness and improving detection skills.

• Set the ground rules. Implement rigorous policies and procedures for how invoices should be processed and paid and create mechanisms for ensuring adherence.  And establish clear protocols for reporting suspected fraud.

• Don’t skimp on content. Cover all aspects of payment fraud, including the types of payment fraud (e.g., invoice fraud, phishing, social engineering), and common schemes.  And be sure to train employees to recognize suspicious activities, such as sudden changes in vendor payment details or unsolicited payment requests.

• Use real-life examples. Explain how attackers use deceptive emails and messages to obtain sensitive information or prompt unauthorized payments.  Incorporate case studies and scenarios to make the training relatable and practical.  Ask frontline staff to share examples of fraud that they’ve encountered.

• Interactive learning. Use quizzes, workshops, and simulations to engage employees actively.

• Keep things current. Regularly update your training material with the latest fraud trends and techniques.  Conduct periodic refresher courses to reinforce knowledge and update staff on new threats.

• Monitor and evaluate. Continuously assess the effectiveness of the training and make necessary adjustments.

• Make fraud prevention culture. Foster a culture of vigilance and encourage open communication among staff to share insights and concerns about potential fraud risks.

A training program with these elements will help mitigate an organization’s risk of fraud.

Conclusion

Mitigating payment fraud requires a proactive approach centered around staff education.  By understanding the vulnerabilities of traditional AP processes, recognizing the crucial role of frontline staff, addressing deficiencies in current training methods, and building a comprehensive training program, organizations can significantly reduce the risk of falling victim to payment fraud.