Know Your Vendor: Fighting Fraud the Smart Way
By Eleanor Hill, Editor
Detecting and preventing fraud is a growing concern for treasurers, especially as operations become increasingly digital and payments are being made in real time. BELLIN has launched a new Vendor Verification tool to help treasurers to stay one step ahead of the fraudsters – and scooped a 2019 TMI Award for Innovation & Excellence in the process.
According to KPMG’s Global Banking Fraud Survey, more than half of respondents stated that fraud recoveries equalled less than 25% of fraud losses. This low recovery rate demonstrates the importance of prediction and prevention efforts in connection with corporate payments. But treasurers have limited time and resources to spend on such activities, so the onus is increasingly on payment providers and treasury management system (TMS) vendors to develop new functionalities that help companies prevent fraud.
To help tackle fraud, it is first important to understand any areas of weakness. André Scheffknecht, CSO, BELLIN, explains: “Generally speaking, companies struggle with a complex and fragmented bank connectivity environment across subsidiaries, which can be a ‘breeding ground’ for fraud. The critical first step to combating this threat is moving to a centralised, bank-independent banking solution that provides full bank connectivity, complete payment transparency and uncapped administrative controls for both domestic and global payments.”
He adds: “BELLIN’s tm5 payments and bank connectivity solution allows corporates to achieve just that – encompassing both domestic and global payments needs of corporates. Users benefit from a multi-banking portal with universal accessibility by any team member, at all subsidiaries worldwide. Fraud-fighting features include two-factor authentication, straight-through processing and group-wide payment processing control.”
While establishing such a controlled environment will make a significant contribution to the company’s fraud defences, as criminals become more sophisticated, even tighter controls and enhanced fraud protection functionalities are required. BELLIN has therefore introduced an innovative additional feature for all tm5 customers: Vendor Verification.
Know Your Vendor
Vendor payment verification is a payment validation check, fully integrated in the tm5 TMS payments platform to ensure that payments are sent only to approved and verified beneficiaries via a centralised database. The feature enables companies to configure vendor whitelists and blacklists.
Every time a payment enters tm5, Vendor Verification compares the account information of the beneficiary with the whitelist and blacklist. If the information does not match, the system either issues a warning or blocks the payment (depending on settings). Both single and bulk payments can be validated. Payments that could not be validated can then be manually approved, overriding the validation result, or confirmed as blocked.
The Vendor Verification workflow:
- Enter/change payment in TMS/tm5
- Remitter account is part of validation process
- Block payment
- Beneficiary is on whitelist
- Un-block payment
Scheffknecht explains: “The solution represents a new and innovative approach to payment fraud prevention. With this tool, treasurers are able to consolidate, validate, and automate an important part of their payment approval process. It provides amazing group-wide control and transparency of vendors to prevent fraud.”
Fig 1: The Vendor Verification workflow
He continues: “The treasurer often cannot identify if a vendor payment within a big bulk payment file could be fraudulent or not. Nevertheless, he or she is the one to sign the payments and send them to the bank. With the integrated validation tool, a new layer of control and security is in place to support the treasurer and to identify whether a bulk payment should be signed and sent to a bank or not. And with fraud as such a large threat to treasurers, this tool is essential to maximising security.”