One of the biggest fraud threats facing enterprises is also one of the oldest.
And it, unlike the rise of artificial intelligence (AI)-driven attacks, comes from within their own company walls.
That’s because, while corporate fraud comes in many colors, as the landscape of work continues to evolve — with remote and distributed offices blurring the lines between professional and personal spaces — the threat of insider fraud for banks and corporations remains a persistent and important challenge to address.
Today’s employees enjoy unprecedented access to sensitive data and financial assets, and this newfound accessibility has also opened the door wider than it has ever been to potential insider threats.
Employees, whether intentionally or inadvertently, may compromise security measures, leading to the theft of data, intellectual property (IP) and even monetary assets. The consequences of insider fraud are severe, impacting not only the financial health of organizations but also tarnishing their reputation and eroding the trust of clients and stakeholders.
Detecting insider fraud poses unique challenges, particularly in a remote work setting. Traditional methods of monitoring, such as physical surveillance or on-site security measures, are no longer sufficient.
But that doesn’t mean the situation is hopeless. Organizations have a slew of tools at their disposable to protect, detect and defend against insider fraud — and just being aware of the threat is a crucial first step.
The ease with which individuals can compromise security protocols poses a significant threat, demanding a proactive approach to detection and defense. Identifying red flags, whether it be unauthorized access to sensitive databases or unusual financial transactions, requires a combination of advanced technology and strategic risk management.
Among the most common types of internal employee fraud is expense fraud, in which workers deliberately inflate figures on an expense report to be reimbursed for more than they should receive from their employer.
Tactics to address this risk include employee background checks, stronger oversight of employee activity and migration away from paper checks and manual data entry toward electronic and automated platforms.
Firms reliant on manual processes are more likely to suffer from insider fraud than firms deploying automated expense management solutions.
“Once you go digital, there’s a lot of extra metadata that’s flowing between the systems so you’re no longer sitting and doing reconciliation and closing the books manually, because you already know what the invoice was, what the fees were, whether the payment was or was not settled, all of this is very quickly captured without human input,” Karandeep Anand, chief product officer at Brex, told PYMNTS in August. “And that’s important, because accounting teams just can’t keep scaling — you can’t keep having humans constantly in the process to pay out, track the payments, reconcile them, it very quickly becomes very error-prone.”
After all, the larger the company, the more departments, and the more frequent it is that the left hand doesn’t talk to the right hand because there’s no visibility — leaving cracks that internal bad actors can exploit.
Tracking expenses accurately becomes challenging when payments are fragmented across the company and locked up in manual and paper-based processes, which is why digital and electronic commercial payments, and the real-time visibility into expenses they provide, offer an attractive solution.
“The largest corporations in America are using some very old, very reliable monolithic systems to manage their treasury function,” Ernest Rolfson, CEO and founder of Payments-as-a-Service solution Finexio, told PYMNTS.
PYMNTS Intelligence has found that virtual cards and digital spend management solutions can help finance departments close the books faster while simultaneously protecting against fraud.
“In today’s operating environment, being reactive leaves firms at a disadvantage. Fortunately, virtual cards are changing the game for businesses by letting them proactively — and easily — control their spend,” Dan Hanks, vice president of global product development at i2c, said in an interview with PYMNTS.
Educating employees about the risks of insider fraud is also essential. Training programs that highlight the consequences of compromised security and the importance of adhering to best practices can empower individuals to become proactive guardians of organizational integrity.
Restricting access to critical systems and information can also help ensure that employees only have permissions necessary for their specific roles, minimizing the risk of unauthorized activities.
Additionally, and importantly, conducting regular security audits is crucial for identifying vulnerabilities. Regular assessments of existing security measures can reveal weaknesses and enable organizations to fortify their defenses before insider threats materialize.