September 24, 2014

There’s a frightening trend in fraud called masquerading.  Masquerading involves someone outside the company mimicking the email address and related information in an email request for an electronic payment, or other things.  It looks just like “the real thing,” but will have some slight variations.  The article does a good job of describing the scam, the clear risks involved, and some preventive measures.  The thing to remember is that cash is king.  If you are wavering on whether to implement a particular internal control, if it involves cash you can never be too careful (particularly when it’s related to electronic payments).  Over my career, I have found that a person’s gut or their intuition is pretty accurate.  If a request for a transaction looks odd to you or it’s outside of normal behavior for your business, walk down the hall (or pick up the phone) and ask the requesting party if it is legitimate. Trust your gut.

Another preventive measure that the article does not discuss is the defense network established by your IT function.  No matter how sophisticated the business, when I have been involved in a systems review we find vulnerabilities of some sort.  Those vulnerabilities open up your business to a variety of risks, possibly including electronic payment fraud.  The cyber crooks are very sophisticated and having an assessment of your IT defenses can help you take care of some of the low hanging fruit as well as more sophisticated issues found further up the tree.

The risks for business are ever-changing.  Not just the scary stuff like this, but natural economic and market risks as well.  Make a point to periodically update your risk assessment function to keep up.  It will be well worth the time.

© Clark Nuber PS and Focus on Fraud, 2014. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Clark Nuber PS and Focus on Fraud with appropriate and specific direction to the original content.

This article contains general information only and should not be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. Before making any decision or taking any action, you should engage a qualified professional advisor.