Fraudulent Transactions in Treasury Operations & How to Prevent Them

Fraudulent transactions in treasury operations are more common than you might think. In fact, a recent survey found that 80% of organizations experienced attempted or actual fraud in their treasury and finance functions last year alone. With such high stakes, the need for vigilance has never been greater. 

Treasury teams operate at the heart of an organization’s financial health, managing cash flows, handling bank accounts, and ensuring funds are allocated correctly. But this vital role also makes them a prime target for fraud. The sheer volume of transactions, combined with the complexity of managing multiple bank accounts and payment methods, creates opportunities for both external attackers and internal vulnerabilities.

In this blog, we’ll break down the most common types of fraud affecting treasury teams and why they happen. Plus, we’ll share actionable steps and tools to help you proactively detect and prevent fraud, giving your organization the confidence to operate securely.

Common Types of Treasury Fraud

Fraud takes many forms in treasury operations, and it often targets the high-value, high-volume nature of transactions managed by treasury teams. 

Here are the typical instruments and schemes fraudsters use that can disrupt treasury operations and how they work:

ACH & Wire Fraud

ACH and wire transfers are a staple of treasury operations. Given how commonly they are used within treasury functions they are attractive targets for fraudsters. Typical schemes that usually result in ACH and wire fraud include:

• Business Email Compromise (BEC): Fraudsters impersonate company executives or vendors to request wire transfers.
• Unauthorized ACH Debits: Hackers or fraudsters initiate unauthorized direct debits.
• Account Takeover: Hackers access a victim's account to initiate transfers, which is often achieved through Phishing or Brute Force Attacks to try and gain account credentials.
• Fake Invoices: Fraudsters send out requests for payment to accounts controlled by the scammer.
• Social Engineering/Phishing: Hackers deceive victims by impersonating an executive or other authority figure to obtain sensitive personal information, such as account details, or to manipulate them into authorizing transactions outside standard controls.

Fraudsters will sometimes use ACH and wire transactions in coordination to get funds into a fraudulent account and then moved internationally where recovery is more difficult.

Check Fraud

Fraudsters are constantly evolving their schemes, and while they might seem outdated, check fraud remains a persistent issue. In fact, a recent survey from AFP showed that checks continue to be the payment method most susceptible to fraud, as reported by 65% of respondents, and that 70% of organizations using checks have no immediate plans to discontinue their use. 

Typical schemes that usually result in check fraud include:

• Counterfeit Checks: Fraudsters create fake checks resembling genuine ones.
• Altered Checks: Details on a legitimate check (e.g., amount or payee) are modified.
• Forged Checks: Checks are signed without the account holder’s permission.
• Stolen Checks: Checks are stolen while in transit, including those carried by the USPS.

Credit Card Fraud

Credit card fraud is another prevalent threat to corporate treasury operations, as fraudsters target organizations by exploiting vulnerabilities in payment systems. Given the widespread use of credit cards for corporate expenses, procurement, and employee reimbursements, this form of fraud can significantly disrupt operations and lead to financial losses. 

Typical schemes that result in credit card fraud include:

• Lost or Stolen Cards: Fraudsters gain unauthorized access to a physical card and use it for transactions without the cardholder's knowledge.
• Card Skimming: Devices are installed on payment terminals to capture credit card details during legitimate transactions, which are then used to make unauthorized purchases.
• Account Takeover: Fraudsters gain access to online accounts linked to corporate credit cards, through phishing or other social engineering methods, enabling them to make fraudulent transactions.
• Synthetic Identity Fraud: Fraudsters use a combination of real and fake information to create a new identity, which is then used to apply for and exploit corporate credit cards.
• Card Not Present (CNP) Fraud: Fraudulent transactions are made online or over the phone, where the physical card isn't required, often using stolen credit card details.

Fraudsters often use a combination of these methods, leveraging stolen or synthetic identities to extract funds and conceal their tracks. As organizations increasingly rely on credit cards for day-to-day operations, robust controls such as transaction monitoring, multi-factor authentication, and spending limits are critical in mitigating these risks.

Internal Fraud

Not all fraud comes from outside the organization. Internal fraud occurs when employees exploit their access to treasury systems to divert funds for personal gain. 

This might involve creating fake vendors, altering payment instructions, or abusing their authority over financial transactions. Strong internal controls and segregation of duties are critical to mitigating this risk.

Why Do Fraudulent Transactions Happen in Treasury?

Fraudulent transactions don’t just happen by chance—they exploit specific vulnerabilities in treasury operations. The intricate nature of treasury work, combined with evolving threats, makes fraud a persistent risk. 

Here’s a closer look at the key reasons why fraud occurs in treasury:

High Complexity

Treasury teams manage a complex assortment of accounts, payment methods, and transactions. With significant volumes of cash flowing in and out daily, oversight gaps can emerge.

When transactions aren’t centralized or tracked in real-time, it becomes easier for fraudulent activity to slip through the cracks unnoticed.

Weak Controls

Fraud thrives where internal controls are weak or inconsistent. Treasury operations without robust dual-approval processes, segregation of duties, or centralized data management are particularly vulnerable. 

A lack of safeguards can leave the door open for unauthorized transactions, whether initiated by external attackers or internal bad actors.

Siloed Information

Treasury teams often work with decentralized data spread across multiple systems and accounts. This lack of integration makes it difficult to get a complete picture of financial activity. 

Without consolidated data, identifying irregularities across accounts becomes time-consuming and prone to error—an environment fraudsters are quick to exploit.

Sophisticated Scams

Cybercriminals are always innovating, creating new ways to breach treasury systems. From phishing emails that mimic legitimate requests to deepfake audio impersonations of executives authorizing payments, these scams are becoming harder to detect. 

Malware targeting financial systems adds another layer of risk, requiring treasury teams to remain vigilant and proactive.

Human Error

Even the most experienced treasury professionals aren’t immune to mistakes. A typo in a payment amount, misinterpretation of a flagged transaction, or overlooking an anomaly during reconciliation can all lead to missed fraud. 

How to Prevent Fraudulent Transactions in Treasury Organizations

Fraud prevention in treasury organizations starts with a proactive approach. When treasury teams address vulnerabilities and implement robust systems, they can significantly reduce the risk of fraudulent transactions. 

Here’s how you can strengthen your defenses with proven best practices:

Centralize Data

Decentralized data is one of the biggest enablers of treasury fraud. Consolidating financial data into a centralized system provides greater visibility and makes it easier to monitor account activity across all bank accounts. 

Establish Internal Controls

Strong internal controls are the foundation of fraud prevention in treasury operations. 

Key practices include:

• Dual Approvals: Require two levels of approval for large or sensitive transactions to minimize the chance of unauthorized payments.
• Segregation of Duties: Divide responsibilities so that no single individual has control over the entire payment process.
• Regular Audits: Conduct frequent reviews of treasury operations to detect and address any irregularities before they escalate.

Regular Employee Training

Even with the best systems in place, treasury teams need to be prepared to recognize and respond to fraud attempts. Regular training ensures staff understand the latest fraud tactics, such as phishing and social engineering, and know how to report suspicious activity. 

A well-trained team is often the first line of defense against fraud.

Cybersecurity Enhancements

With payments almost all done digitally, cybersecurity is critical to safeguarding treasury operations. 

Protect your organization with measures like:

• Multi-Factor Authentication (MFA): Add an extra layer of security beyond passwords to verify user identities.
• Encrypted Systems: Secure sensitive data with encryption to prevent unauthorized access.
• Robust Firewalls: Protect treasury systems from cyberattacks and unauthorized network access.

Preventing fraudulent transactions requires a combination of strong internal processes, centralized systems, and educated personnel. But even with these practices, fraud prevention can be a daunting task. 

Next we’ll talk about how DebtBook’s Cash Management fraud detection features can simplify and enhance your efforts.

Leverage Technology to Strengthen Fraud Prevention

Modern treasury tools streamline processes, provide real-time insights, and reduce the manual work that often leaves room for error. When you integrate the right technology into your treasury operations, you can stay one step ahead of fraudsters and safeguard your organization’s financial health.

DebtBook’s Treasury Fraud Detection Capabilities

DebtBook’s Cash Management solution offers advanced tools designed to simplify fraud detection, giving treasury teams the visibility and control they need to operate securely. 

Here’s how it works:

Real-Time Monitoring

Fraud can happen in an instant, which is why real-time monitoring is crucial. 

DebtBook automatically tracks activity across all connected bank accounts, flagging unusual transactions as they occur. This immediate visibility ensures your team can act swiftly to investigate and mitigate potential risks.

Flag Unauthorized Transactions

Treasury operations often involve complex account structures, but DebtBook makes it easier to manage them securely. 

With customizable rules, you can flag transactions that exceed pre-set limits, originate from restricted accounts, or don’t align with expected activity. 

For instance, a large wire transfer from a receivables-only account would trigger an alert for immediate review.

Eliminate Manual Entry Errors

Manual data entry is not only time-consuming but also prone to errors that can mask fraudulent transactions. 

DebtBook eliminates this risk by automatically pulling transaction data directly from your bank accounts via API. This automation ensures accurate and up-to-date records without the extra work.

Bank Analysis Review

Reviewing bank account analysis statements is often a tedious task—but it’s also where irregularities can hide. 

DebtBook simplifies this process by organizing statement data for easy review. You can quickly pinpoint discrepancies, such as unauthorized charges or suspicious activity tied to specific accounts.

Custom Rules for Treasury Teams

Every organization has unique needs when it comes to fraud prevention. DebtBook allows treasury teams to create custom rules tailored to their specific operations. 

For example, you can set rules to:

• Flag wire transfers over a certain amount.
• Identify check transactions originating from restricted accounts.
• Monitor outflows from accounts designated for specific purposes.

These customizable features ensure your fraud prevention strategies align with your organization’s financial workflows.

See DebtBook in Action

Fraudulent transactions pose a serious risk to treasury operations, but with the right tools and practices, they’re detectable. 

Want to see how DebtBook’s fraud detection tools can work for your organization? In our 2-minute Feature Flash, you’ll learn how DebtBook's Cash Management solution helps treasury teams:

• Automatically categorize transactions.
• Flag suspicious activity based on custom rules.
• Review bank analysis statements with ease.

Explore DebtBook's Cash Management Fraud Detection feature in our 2-minute Feature Flash!

Related Cash Management Reading

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• How Cash Forecasting Boosts Creditworthiness & Lowers Borrowing Costs
• [FREE DOWNLOAD] Cash Position Worksheet for Treasury

Disclaimer: DebtBook does not provide professional services or advice. DebtBook has prepared these materials for general informational and educational purposes, which means we have not tailored the information to your specific circumstances. Please consult your professional advisors before taking action based on any information in these materials. Any use of this information is solely at your own risk.