Building Resilience: Advanced Fraud Prevention Strategies in Treasury Management

With business transactions happening nearly 100% digitally and payments moving online, one of the main concerns for treasurers and finance professionals has been, and will be, online fraud. As payments become more secure, the sophistication and frequency of cybercrime continue to grow. Fraudsters rely on advanced technologies such as artificial intelligence and machine learning to outsmart security measures. According to the 2023 AFP Payments Fraud and Control Survey, 65% of organisations experienced attempted or actual payment fraud in 2022, with the highest fraud rate (67%) reported by companies with annual revenue between $1 billion and $19.9 billion, typically those with multiple subsidiaries.

For treasury managers overseeing global companies, the threat is multiplied by multiple, often disjointed systems, which create gaps in centralised control and a lack of consolidated security practices. According to PwC's 2022 Global Economic Crime Survey, businesses operating across multiple jurisdictions face a 21% higher risk of payment fraud than those operating in single markets. To prevent the rising challenges, organisations need to act proactively rather than reactively and leverage technology, as well as strengthen internal controls and foster collaboration with financial institutions to improve the security of corporate finances.

Modern fraudsters step up their game each time security measures become stronger. They now use not only sophisticated techniques but also technology to detect and exploit vulnerabilities within treasury processes and systems. The most common ones businesses should be aware of are:

• Business Email Compromise (BEC): This is an extremely prevalent type of fraud whereby criminals impersonate company staff members or known suppliers to deceive employees into authorising and expediting fraudulent wire transfers.
• Synthetic identity fraud and deep fake fraud: A relatively new threat but extremely dangerous, as fraudsters leverage AI to generate fake identities, open fraudulent accounts, and siphon funds unnoticed. Cybercriminals can also manipulate videos and voice using AI to impersonate staff and authorise certain transactions.
• Account takeover attacks: This is the most common and widespread type of fraud, where cybercriminals use phishing or credential-stuffing techniques to gain unauthorised access to financial systems.

The two factors causing traditional fraud prevention methods to be insufficient are, firstly, the widespread use of AI tactics and, secondly, the growing nature of international operations, which leaves gaps in systems and security and a lack of centralised monitoring. To effectively combat evolving threats, companies need to look into more advanced security measures such as ML and AI, blockchain, MFA, as well as regularly reviewing their security protocols and strengthening their collaboration with banks.

Blockchain technology has definitely shaken up the financial industry in the last decade, but in the context of treasury and fraud prevention, it is more than just a fancy gimmick. Gartner’s Blockchain Business Value Forecast estimated that by 2025, blockchain will add £143 billion to corporate finance operations, while payment security and verification will be the primary use cases.

Blockchain strengthens the security of financial transactions and provides additional transparency with an immutable and decentralised ledger, amongst other benefits:

• Tamper-proof transactions: The decentralised nature of blockchain means that transaction records and data cannot be altered or tampered with, which reduces the risk of payment fraud.
• Smart contracts: This is essentially compliance automation for payments, which applies a set of pre-determined rules for payments to minimise unauthorised activity.
• Enhanced visibility: Because blockchain enables real transaction visibility, accurate monitoring and simplifies audits.

While still a relative novelty, blockchain may revolutionise fraud detection and transaction security in the years to come.