Reducing Payment And A/R Fraud Risk Exposure With Technology



George Uko

Manager of Credit & Collections,


[00:01] George Uko:

So let’s go ahead and talk about two different types of fraud. Let’s talk about internal fraud and then let’s also talk about external fraud. We’ll go ahead and start with the external fraud. Think of the different fraudsters. They’re going to go out there. They’re going to use the credit cards. Credit cards, if you have them as far as your system where customers could go in, they could go in place orders. They don’t need to talk to people. So what they’re going to do is they’re going to use the stolen credit cards to go ahead and make the purchases. In turn, you’re not going to know as buyers, that credit cards are stolen. But that’s one way for them to get around as far as your system. So big thing with credit card fraud. Think of it past the different customers. They may be what we call phishing. So with phishing, what they’re going to do is they’re going to try and take over. As far as your credit card information, they’re going to look for you to provide as far as that information. Anytime you have anyone asking for your credit card information, never give it. Because the hard part with that is that these fraudsters are great. They know how to go ahead and create as far as different emails that look legit. So when that happens, you give them the information they now have the credit information to go to town. The hard part with the account is a takeover. They’re going to do that to other customers. They’re going to use those stolen credit cards and they’re going to make those purchases. So that is one thing we definitely want to try and prevent. You may also have as far as the counterfeit cards if you happen to have a store presence. Think of the store presence. You’ve got someone presenting the American Express card. American Express starts with three seven. We all know that. But with a fraudster credit card, they may have a visa credit card with American Express number. It used to be the fraud manager with Commerce Bank. And we would actually get these credit cards back. And you’d be surprised with what the fraudsters would do. They would actually take as far as those numbers and put them on different credit cards.

[02:18] George Uko:

Another thing to think about is check frauds. So check frauds. They’re going to give you counterfeit checks. So with the counterfeit checks, you once again are not going to know what’s happening with those counterfeit checks. By the time, you know, the counterfeit check is no good or you have an issue, you’re probably going to be taken that loss. So the big thing, once again, look at the information as it comes through. If there’s something that looks odd or you look at the check and something doesn’t look legit, call the bank. Make sure that the check is valid before you take a loss. Another thing, look at the number too under check fraud. Think of forged checks. If somebody got hold of your checkbook or created a fake check, they’re going to go ahead and write the check knowing that it’s probably going to go through. The hard part is that once that goes through, now it’s going to go through as far as our system. So as much as possible, we want to go ahead and prevent that. The big thing with all this information once we know there’s some type of issue, we, in turn, want to go ahead and alert our system, start putting the information in so we can block as far as the customer, block as far as the email, block as far as the address. Once we get that information, we need to start monitoring our system. Another thing we have here to the right. Think of it as far as killing. Killing is to go ahead and I’m going to write a check. But I know the checks are going to go ahead and bounce. So the check will come through. By the time I realize it’s going to bounce, the person’s gone. So they know what they’re doing. They know how to kind of float through as far as the system. They will go ahead and test as far as our system and go forth.

[04:11] George Uko:

Another thing that we may have is what we call lapping. And what lapping means is from an internal perspective or even from an external perspective, the customer may be creating as far as a fake account. And what they’re trying to do is hide as far as that credit. They’re trained to get as far as additional purchases. I used to work for American Express and one of the big things we used to run into is some of our customers would actually return a lot of merchandise. Well, returns aren’t necessarily a bad thing, but at the same token, they need to make payments. So that’s kind of an example of lapping. They’re trying to give us falsely as far as information to flow through our system.

[05:00] George Uko:

Email phishing. Once again, I’m gonna go ahead and send an email. I may try to get you to buy my product. I may try to get as far as your credit card information. So the big thing with as far as fishing, I’m trying to gain your information. So if I’m the fraudster, I want to go ahead and use your information to make as far as my purchases. So the big thing with phishing, by the time you figure out what’s going on with that, they’re gone. They know what they’re doing and it’s hard to prevent. But once again, you really have to be careful about what information you share. Once again, if someone’s asking for your credit card information, never give it, because once they have it, they’re gonna go to town. The second one on there, think of it as far as a reseller in storefront frauds so reseller, they’re gonna get your products. They, in turn, are gonna go ahead and sell as far as your merchandise. So for myself, I work for Staples Promotional Products. Basically, anything with your company logo is what we sell. So from time to time, I will go out on the Internet. I’ll look on the internet. And it’s amazing where I could find some of our products. Our products are geared for our customers, but in turn, some of our sellers hire seller items that are on there like leather coats and stuff that may have a company logo, but somebody is out there selling it and it’s not us. So that’s something to look for. Another thing to think about with as far as your reseller. Think of storefront frauds. And once again, this kind of gets back to what I was saying. You have customers or fraudsters out there. They’re creating fake stores. So you look at that and you think to yourself, those are my products. They’re not one of my distributors. I’m not selling directly to them. How are they to get my product?

[06:54] George Uko:

So once again, this is where you need to put some attention and really focus on where are they getting these products and what’s going on? A lot of times with this, especially depending on the different products, we’ll actually put different rules into our system and we’ll monitor those different products because of what that is. Those are a high resale and that’s where they’re making as far as their money. Another one to think about. You have what is called third-party skimming. So skimming would be- This is where I could be internal and I’m taken as far as the different payments. Maybe I’m taking so much off the top of the payment and I’m putting it to a different account. So skimming once again, I’m trying to take that money and take part in it, but not enough to get caught. And I think that’s the catch there. They’re gonna do anything they can to let it build up. But they don’t want to get caught with what they’re doing. And that’s a hard one to prove. But once again, that’s where you need to do your due diligence and watch what’s going on within your system. All right. Let’s go ahead and look as far as internally with the different types of fraud. So think of your different frauds, especially from an internal perspective. I know where I currently work. We ran into this. We’re gonna go ahead and approve orders and we’re thinking we’re dealing directly with the customer.

[08:24] George Uko:

We don’t know until later on that they’re not going to pay. So your fraudulent write-offs. What’s going on with your different write-offs? You have to go back behind the scenes and start from scratch and figure out what happened here. Why did this get created? Why did he get it written off? You know, the hard part behind this. Sometimes what you may find, depending on your different products and maybe someone internal that created a fake account, they knew they weren’t going to pay it. But at the same token, they knew how to get through as far as your system. So once they flow everything through that system, when it comes time for the payment, you’re not going to get a payment. And in turn, you’re going to have to write it off. The big thing with as far as these types of customers or setups, that’s where you need to do your due diligence when you first set up the customers. Make sure you have all the information. Make sure everything verifies. If not, you could run into the situation. Another thing to think about. Think about some of your different products. Maybe some of your different products are getting sold without your authorization. You know, it’s sad to say this. It could be internal where people are walking away or walking off with your products internally. They, in turn, could take as far as your products and sell them. That’s one thing. Once again, why go on the Internet?

[09:46] George Uko:

I look to see where these products are being sold from if they’re being sold from the local. I kind of put a deeper look into it to see what’s going on with us, because once again, I don’t want them selling our products. That’s why we have different customers. And then finally, if you look to your right once again, when we talk about as far as fishing. So think about fishing. When I was a fraud manager, I don’t know if you guys know. I’m sure you know, T.J. Max. I wasn’t with T.J. Max, but I was a fraud manager at Commerce Bank. And what happened was, a van parked next to one of the T.J. Max, they hacked into their system and caused a huge issue as far as a fraud. So think of what’s going on. Think of what’s going on with different information. But once again, the customer details. What are some of the customers looking for? Think about how much detailed information you’re getting in the old days and even today, you may have different people calling in for information. They may get one piece from one particular rep. They’re going to call back yet another piece of information from a different rep. As they build their case, they’re going to have all the different information. As they have all that information, they can now commit as far as the fraud. So once again, think of what’s going on. And this is why as a group, you really need to work closely with everybody within your organization because this is where they’re going to get the different pieces and once again, put the full puzzle together.

[11:23] George Uko:

All right. Let’s talk about the different impacts to as far as the cash space. What is happening with different frauds? So think of the different frauds. We’re going to have to take a loss. So with a different loss, what’s that going to do to our working capital? This is now an expense. So this is something that we don’t want as an expense. It is part of doing business. But once again, what can we do to reduce this expense? This is something you do want to keep under control. You want to monitor at least on a monthly, quarterly basis to know as far as what’s going on because what you could do is over time, you could see the different trends. And it’s amazing. All this is within your different numbers, but you have to know where to look for it. Another thing to keep in mind, if you look at the second one here with a company reputation. Think of once again as I was talking about T.J. Max, once a customer knows there’s been fraud at a particular store, chances are they’re not going to want to spend at that store. They’re going to be more cautious. A lot of times it’s nothing that the store did, it’s just someone who hacked into as far as the system. So once again, that company’s reputation is huge. You don’t want to have that happen. And then the bottom one, think about the customer experience. If I’m a customer and I go into T.J., Max, just for an example, and all of a sudden I can’t use my credit card because I shopped at T.J. Max. That has impacted me. Most of us have all traveled from different places to get here today. Well, think about if your credit card gets stopped, what are you going to do? So once again, we need to be careful about the different impacts on the customers. We want our customers to be happy and we want them to spend. Another thing to think about when we look at from an internal perspective, think of what’s happening internally. Maybe we have what we call increased attrition rates. So think of the attrition rates. We’re going to have more turnover. There’s going to be different things happening within as far as our business.

[13:35] George Uko:

Another thing that really kind of hits me and hits as far as my group. Think of where we’re putting our work effort, our work efforts now going towards these frauds. So we should be collecting, but instead, we’re trying to stop as far as these frauds. So behind the scenes, we need to really balance as far as what we’re doing to minimize as far as the loss. Another thing to keep in mind and this is something really to put the focus on the different types of frauds, they are ever-changing. Every day the different frauds change. And the other thing behind it, a lot of these fraudsters know more than we know. So they’re good at what they do. And it’s almost like a profession for them to go ahead and outsmart us. So once again, we have to stay one step ahead of them. So let’s talk about some different tips, different things to look at for different fraud prevention. So next, the bullets here will hit these individually. But one of the things we need to think about is what can we do to protect as far as our data you have as far as credit card information in your system, you’re taking credit cards from your customers. We need to protect that. Think about the different customers or the employee training. We need these employees trained to know what to look for. We need to prevent fraud. And the village and I, that’s us. We need to watch what’s going on within our systems. And finally, based on our vigilant eye, we need to go ahead and update as far as our different policies. So as these frauds happen, we need to keep updating as far as our frauds are policies.

[15:23] George Uko:

So think about your safe card as far as your different data. What are we doing to safeguard as far as our information? Any time we take credit cards, they may be truncated. We don’t want someone to have access to as far as this information, it needs to be protected. You know, our customers trust when they make a payment with us that we’re going to go ahead and take that payment and finish as far as the transaction. They don’t want to think about what they are doing with my information? So we need to protect this. This is a big one. Think about as far as the different training round this time of year, usually around the first the year, depending on your company, you go in and you have your different training, whether it’s called PCI training or as far as fraud training. The big thing around it, make sure your employees know their role in as far as this training. Let them know the seriousness of the training. You know, to them it may be like, “Oh, we’re going to take this training again. We took this last year, it’s the same training. It’s serious stuff because they are at the front line of different frauds. They are the front line for our customers. So we want them to have the training and help prevent as far as the fraud. From our standpoint, think about what we can do, what can we do to stay one step above as far as the fraud. So a vigilant eye. I used to work for an online retailer and we used to sell binoculars and telescopes.

[16:59] George Uko:

While some of those were about 15 hundred-35 hundred dollars a piece. Guess what? That’s where the frauds want. They want as far as the higher in products so they could go ahead and resell them. So do we have customers that are ordering a lot of the same product. If they’re ordering it. Is that a valid reason or should we dig a little more to see what they’re doing? A lot of times this is where you could find some of the different frauds. If you dig into it and find out what’s going on and once again, this information is in your system, you just have to dig it out. And our different policies. This is one where I think a lot of the employees have a hard time. They don’t understand the reason for the different policies. Yeah, my big thing is with your different customers. You want them to feel safe as far as charging with you. You want to drive as far as you spend. In order to do that, we need to go in and we need to create different policies and make sure everybody understands the role within the organization and how they impact the different policies. And with the policies, there has to be as far as rules around it. If someone breaks the policy, depending on the seriousness, they should be put on counseling. I mean, every company is different, but we need to have rules and we need to enforce those different rules. For us, we have different analytics. We have HighRadius. Look at some of the different items that are being charged. Look at where some of the different items are being sent. For example, where I currently work, we look at the different addresses where we send the customer products. If we’re sending it to a home address, that puts up a red flag. If they’re making a business purchase, should it be going into the home or should it be going to as far as the business?

[18:55] George Uko:

So look at the different analytical tools. Look to see are we getting all the necessary information? And that’s really what you want to dig through your information. Another one. That is a huge one. Work with your merchant processor. So when it’s saying leveraging banking tools, one thing to keep in mind as a group here, what may impact me may not impact you, but down the line, it could impact me also. So the banks know where some of the different frauds are happening. The banks know some of the different groupings of the credit cards where there are different issues. So we need to take that information. We need to work with different information. They’re going to give you that information. And if not, I would ask, because this is one of the best ways to reduce some of the different frauds. They’re going to tell you where some of the different frauds are occurring. Another thing, depending on your system, how integrated your system is. See if we can go in. One of the things I’d like to do and as I work with our special order team and our customer service, I look for different addresses. If I know I have a fraud, I’m going to pull all the orders for that particular address. I’m going to go in. We’re going to stop all orders from being shipped to that address. We’re going to flag as much information as possible because of the thing behind it. You have those warning signs. We need to use those warning signs to prevent additional fraud, because one of the things to keep in mind, one little fraud may not seem like a lot, but as you know, more comes through. You could take a bigger loss. So you need to be on top of, as you work your chargebacks, the different fraud. What’s going on? So think about how we look at this, why we have a low adoption and different compliance. So think about what’s going on within your business.

[20:57] George Uko:

I’ve sat with several of you for breakfast or yesterday on the bus or at the meetings. And one thing to keep in mind with as far as the different businesses, it’s hard to break old habits. You may have a group that’s been together for many years, trying to get them to see as far as some of the different changes, we need to get everybody on the same page. Another thing, number two, which is right there in the middle. Maybe you have what’s called a gray area of compliance. So maybe it’s kind of out there, but maybe you’re not quite sure how to handle it. Get it to the right manager, get it to the right person within the organization and start as far as getting people to look at it. The minute you don’t, that’s when it’s gonna hit you. And then finally, if you look at number 3, which is in green, anytime you’re dealing with fraud, it’s a complex issue or complex process. The reason being is you have to do a lot of digging. You need to find what’s going on. And you may never know 100 percent why this happened, why did they hit your particular company? But the more we could dig, the more we could prevent additional fraud. So here’s something to think about. And if you’re on the fraud side of the business, here’s something kind of like from a HighRadius standpoint. But this is from a fraud standpoint. What can we do to prevent fraud? One of the first things you want to do is have real-time screening. So if you can look at the orders before they flow through the system, scan them. Do they look at the budget? Do you have all the information? If so, you could go ahead and release the order. Now, the one on the bottom left where it says the false positives, be careful with that. You don’t want to go to another extreme. You want to review orders. But at the same token, you want the good orders to go through. So you want to look at the right information, but you want the right orders to go through. And that’s really where you have to find that right balance, because that balance, you want additional spend, but at the same time you want to reduce your fraud.

[23:07] George Uko:

Another thing to think about. What about user behavior? Why are they making as far as these different orders? What’s causing them to do this? Is it for resale? Is it different types of products? You know, that’s something you really need to look at. And then finally, the bottom one, if I have the different reporting, being a manager, I need to look at the different reporting to see what’s going on. So the different tracking, where am I seeing where are the different sales? Can I dig into the different skews? Where’s the fraud occurring by design? So a lot of times, what you’ll find on fraud, it may hit different particular areas and you could even go based on zip codes. I mean, there’s so many different ways that you can look for it. Look for as far as the banking tools from your credit card processor. Ask them where are we seeing different frauds? What are some of the different frauds at this time? Let them help you because at the end of the day, you want to reduce your chargebacks, you want to reduce your fraud. And finally, let’s look at five different things you can do to prevent fraud. So one of the things we need to do. Number one, as soon as you get any information and you deem it, it could possibly be fraud, alert the right groups, alert the right departments. Like I said before, where I currently work, if we detect any fraud, I’m on the phone right away with our customer service department or shutting down the email. We’re shutting down the credit card. We’re blocking as far as the address. So no additional orders could go through. We want to prevent additional loss. Another thing to keep in mind, number two, you don’t know if it’s internal. You don’t know if it’s external at this point. Be careful who you share that information with. If it’s an internal fraud and you start letting everybody in your company know, “Hey, we have some fraud here”, they’re going to stop what they’re doing.

[25:09] George Uko:

So you want to be careful in what you’re sharing so the people don’t have all the information. Another thing we need to think about. Number three. Do we have documentation to prove what’s happening? So, for example, do we have shipping or tracking reports to tell us where the items were delivered to? So if need be, I could go ahead and do that. We could track down that address depending on the dollar amount. Maybe we get the local police department involved. There’s a lot of different things we can do, but a lot of this is dependent on the dollar. Other things we want to do. Number four. We want to restrict that person’s access to the system. So think of maybe you have an external fraud and they’re ordering online through your system, block as far as them getting into your system. You need to slow them down because if you just leave them open, you’re going to have additional fraud. So we went to block that. And then number five, we went to set up as far as a plan. What are we going to do to deal with this fraud? There are different things you may want to do, but you need to address it. You need to get the right people involved and work together and work smarter to go ahead and put it into this. Because once again, this is an ongoing thing and ever-changing. And the only other thing I want to add, when I was the fraud manager, you know, we’d have three hundred and forty different rules behind the scenes. So we would have different ways to go ahead and stop the fraudster. It’s not as simple as the address doesn’t match or the credit card doesn’t match the address. You have to have a lot of different rules behind the system to stop it. So thank you.

[00:01] George Uko: So let’s go ahead and talk about two different types of fraud. Let’s talk about internal fraud and then let’s also talk about external fraud. We’ll go ahead and start with the external fraud. Think of the different fraudsters. They’re going to go out there. They’re going to use the credit cards. Credit cards, if you have them as far as your system where customers could go in, they could go in place orders. They don’t need to talk to people. So what they’re going to do is they’re going to use the stolen credit cards to go ahead and make the purchases. In turn, you’re not going to know as buyers, that credit cards are stolen. But that’s one way for them to get around as far as your system. So big thing with credit card fraud. Think of it past the different customers. They may be what we call phishing. So with phishing, what they’re going to do is they’re going to try and take over. As far as your credit card information, they’re going to look for you to provide as far as that information. Anytime you have anyone asking for your credit card…

What you'll learn

  • Top A/R frauds to safeguard your organization against
  • Understanding the role of predictive analytics to reduce frauds in A/R

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HighRadius Integrated Receivables Software Platform is the world's only end-to-end accounts receivable software platform to lower DSO and bad-debt, automate cash posting, speed-up collections, and dispute resolution, and improve team productivity. It leverages RivanaTM Artificial Intelligence for Accounts Receivable to convert receivables faster and more effectively by using machine learning for accurate decision making across both credit and receivable processes and also enables suppliers to digitally connect with buyers via the radiusOneTM network, closing the loop from the supplier accounts receivable process to the buyer accounts payable process. Integrated Receivables have been divided into 6 distinct applications: Credit Software, EIPP Software, Cash Application Software, Deductions Software, Collections Software, and ERP Payment Gateway - covering the entire gamut of credit-to-cash.