How to Protect Your Business Against Financial Fraud

8 min read

Financial fraud is an ever-present threat to businesses. Criminals, operating both online and offline, are constantly hatching more intricate schemes and tapping on the growing capabilities of technology to exploit the smallest of vulnerabilities.

While it is not possible to guarantee that your business is fully insulated from the risks of becoming a target or victim of financial fraud, there are precautions you can take and things you can do to minimise the odds and safeguard your money and data.

Key Takeaways:

  • Financial fraud is the illegal acquisition or theft of money or financial assets from another individual or a business.
  • Fraud can happen as a result of data breaches, identity theft, phishing, and human error.
  • Prevention strategies should incorporate a mix of employee training measures, risk assessments, and investing in the right tools.

What Is Financial Fraud?

Financial fraud is the illegal acquisition or theft money or financial assets from another individual or entity. Criminals often attempt to steal money from a business by illegally accessing its financial accounts or sensitive customer data.

Perpetrators of financial fraud can be individuals, organised groups, or even trusted professionals, taking advantage of their level within a company to embezzle funds or engage in illicit schemes.

Businesses struck by financial fraud often suffer in terms of reputation and it can be difficult to recover from just one incident. Moreover, the interconnectedness of financial systems means that the impact of fraud can ripple across borders, requiring subsequent sums of time and money to recover lost funds.

Common Sources of Financial Fraud

There is no shortage of cybsersecurity tools and companies operating today, yet criminals who know where to look can bypass even the strongest of defences. This is where understanding the various sources of financial fraud can be helpful as it enables you to identify what sort of measures to take.

Data breaches

One of the largest and most common forms of financial fraud is a data breach, which happens when criminals gain access to sensitive information — including employees’ personal details, corporate credit information or bank account details — from a company's database. They can then use this information to commit fraud, either by using the stolen information to make purchases or by selling it to other criminals.

This can happen with highly skilled cybercriminals who can exploit blind spots in an organisation’s network or infrastructure to infiltrate their databases and servers. Human error is another cause. All it takes is one staff member unknowingly installing malware, or clicking links in phishing emails for data breaches to happen. This is why many processes in businesses and especially financial institutions require multiple levels of approval.

Identity theft

One of the most common sources of fraud is identity theft. This is when someone uses another person’s information — like a individual’s name, passport number, or credit card number — to open bank accounts, phone lines, or conduct illegal activities in your name. Identity theft is often one of the results of data breaches.

Sometimes, it's not even a breach from outside but a breach from within — disgruntled employees might misuse their access to cause harm. Whatever the path, the outcome can be disastrous, leaving businesses scrambling to contain the damage and rebuild trust with customers and partners.


Phishing involves the sending of emails or texts impersonating an organisation or someone within the recipient’s company. They often include a link to a fake website that looks legitimate but was built for the sole purpose of stealing data.

Phishing is most successful when it occurs to unsuspecting employees, who don’t stop to check the sender’s email address or check with a co-worker before sharing login credentials or clicking on malicious links. Weak passwords and lacklustre cybersecurity practices can just as easily open the door for cybercriminals to slip through undetected.

Assessing Your Business's Vulnerabilities

Where is your business most vulnerable? Where are controls most lacking? It’s important to cover as much ground as possible over multiple departments to develop an effective fraud prevention strategy.

Step 1 

Conduct a thorough risk assessment  


Work with your IT department or engage external cybersecurity experts to evaluate security protocols and your IT architecture. Thoroughly review software applications, APIs, and other interfaces prone to exploitation. Consider using penetration testing, vulnerability scanning, and threat modelling to pinpoint potential weaknesses. 

Step 2 

Review network security 


Review your firewall rules, configurations, and security protocols. Ensure that your network is sufficiently segmented so that any malware threat can be sufficiently contained without compromising more systems or devices. 

Step 3 

Identify potential breach vectors 
Check your email authentication mechanisms to ensure that they are adequately secured to mitigate phishing risks. This includes the DMARC, SPF, and DKIM email authentication protocols. Look for loopholes or blind spots in your access controls, applying the principle of least privilege (PoLP) and two-factor authentication (2FA) where it hasn’t yet been introduced. 

Step 4 

Run a simulated attack 


Conducting a simulated attack on employee emails is a good way to gauge the overall level of threat awareness and vigilance among your employees. This can help identify the ones who may need additional training. 

Implementing Fraud Prevention Strategies

The best defense is a good offense, and the same applies to financial fraud. In addition to implementing strong security protocols, the human aspect is crucial and cannot be ignored.

Failing to train and educate your employees is half the battle lost because human error is a big reason why many financial fraud schemes succeed. With that in mind, let’s take a look at some prevention strategies you can implement today.

Maintain strong internal controls

This involves implementing measures that ensure accountability, accuracy, and reliability in financial reporting. It is important to establish a system of checks and balances to prevent any one individual from having too much control over financial transactions.

One way to achieve this is by segregating duties among employees so no individual has complete control over any one aspect of financial reporting. For example, the person who approves expenses should be different from the person submitting payment requests.

Regular audits are also crucial in maintaining strong internal controls. These audits should be conducted by independent parties to ensure objectivity. They should focus on the effectiveness of internal controls and identify any potential lapses.

Last but certainly not least, establish clear and stringent approval processes. Every financial transactions needs to be authorised by an employee with an appropriate level of approval. For example, larger expenditures may require approval from multiple levels of management. There should also be a clear record of all purchase requests, invoices, and sums involved.

Employee training

Ensure that your employees are kept up to date on the latest in cybersecurity news, trends, and best practices. This includes how to create strong passwords, avoid phishing scams, and identify suspicious emails or links. Providing training in a variety of formats, such as videos, workshops, or e-learning modules, can help ensure employees retain the information.

Prevention is more powerful than a cure, and this is where a mindset of vigilance can make all the difference. Encourage or incentivise your employees to report suspicious activity or conduct regular security checks. This makes it much more likely to detect potential threats or signs of fraud before more damage is done.

Invest in fraud detection and prevention tools

There are many fraud detection and prevention tools available today that allows businesses to monitor financial transactions identify unusual activity. These tools can detect patterns and alert businesses to potential issues before they escalate.

These are some tools you can consider integrating into your security:

  • Intrusion detection and prevention systems (IDPS) to identify anomalous activities in real-time
  • Security information and event management (SIEM) tools for centralised monitoring and correlation of security events
  • Web application firewalls (WAFs) to protect against application-layer attacks
  • Biometric Authentication Systems such as fingerprint or facial recognition for an extra layer of security to access controls
  • Document verification and validation tools that employ digital signatures or encryption to ensure the authenticity of documents

Potential Signs Of Fraudulent Activity

Perpetrators of financial crime can be from beyond or within your company. It can be hard to uncover employees engaging in fraudulent activities as they will be trying to cover their tracks. However, there are some signs that could signal something suspicious is happening. Here are some of them.

Warning Sign 


Unusual Transactions 

Transactions that are unusually large and frequent or made to non-whitelisted vendors may indicate fraudulent activity. 

Missing Documents 

Missing or incomplete documentation to support financial transactions should be investigated as it could be an indication of fraud. 

Changes in Vendor Patterns 

Sudden changes in the types of vendors you transact with, or an increase in the frequency of payments to a particular vendor, could be a sign of collusion. 

Missing Inventory 

Unexplained shortages in inventory or raw materials can signal theft or unauthorised use for personal purposes. 

Duplicate Invoices 

The presence of two or more invoices for the delivery of the same goods or services may be an attempt to double-bill the company, diverting funds to an illegitimate source. 

Altered Payment Instructions 

Requests for changes in payment instructions through email or other communication channels, without proper verification procedures, could indicate attempts to reroute payments to fraudulent accounts. 

Unusual Volume of Voided Transactions 

If there are a series of voided transactions that cannot be adequately explained, there is a possibility that an employee is attempting to manipulate records and financial reports. 

Responding to Financial Fraud Incidents

It is entirely possible that your company becomes affected by financial fraud in spite of the measures taken to prevent it. A timely response is of utmost importance and it helps to have a well-constructed incident response plan in place. The following are some steps to consider:

  1. Immediately disconnect and isolate the affected systems to prevent further damage and preserve evidence.
  2. Notify appropriate internal personnel, law enforcement authorities, and legal partners.
  3. Conduct a thorough investigation to identify the extent of the damage and the steps necessary to remediate the incident.
  4. Notify affected customers and partners, providing them with information on steps they can take to protect themselves.
  5. Implement changes in response to the incident, such as revising security protocols, employee training, and implementing fraud detection tools.

Cooperating with law enforcement and legal partners can expedite the identification and prosecuting of those responsible for financial fraud. As part of damage control measures, consider having a communication strategy in place to inform stakeholders and the press about the incident and efforts made to prevent future occurrences.

Make your international payments safer with Wallex

Wallex can help businesses to make frequent and large international transactions with a greater sense of security — with features such as the Maker-Checker workflow and the MT103 document.

The Maker-Checker workflow helps to improve internal controls and governance by requiring the approval of at least two individuals before a transaction is made. An originator will initiate the transaction (maker) and the approver (checker) will authorise it to be made.

Wallex provides the MT103 document, which allows you to track your funds after making a SWIFT transaction. This gives clarity to all parties — from the financial institution, to the sender, and the recipient — and helps reduce fraudulent transactions through a standardised system.

Want to find out more? Get in touch with our team here!

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