How to Report a Fraudulent Transaction in Treasury

Written by David Edwards | Feb 19, 2025 4:59:12 PM

Fraud prevention is a top priority for treasury teams and for good reason. Treasury operations sit at the center of an organization’s financial health, handling high-value transactions that make them an attractive target for fraudsters. With strong internal controls, vigilant monitoring, and the right technology, many fraudulent attempts can be stopped before any damage is done.

But what happens when fraud slips through the cracks?

Even with the best safeguards in place, no system is completely immune. If your organization spots a fraudulent transaction, quick and decisive action is critical. The faster you respond, the better your chances of recovering funds, limiting exposure, and preventing further losses.

So, what should you do next?

Steps to Report a Fraudulent Transaction

In this blog, we’ll walk through the immediate steps treasury teams should take after detecting a fraudulent transaction from securing accounts and notifying the right stakeholders, to reporting the fraud and strengthening defenses for the future.

Step 1: Identify and Confirm the Fraudulent Transaction

The first step is to make sure the transaction in question is truly fraudulent. While some cases of fraud are immediately obvious, such as an unauthorized wire transfer to an unfamiliar account, others might not be so clear.

Treasury teams deal with high volumes of transactions daily, and what looks suspicious at first glance might turn out to be a simple mistake, like a duplicate payment or a misclassified expense.

Review Transaction Details

Start by digging into the transaction itself.

Look for:

Unexpected payment recipients: Is the account unfamiliar?
Unusual payment amounts: Does this transaction deviate from typical patterns?
Strange timing or frequency: Was the payment made outside normal business hours or as part of an irregular pattern?

If something doesn’t add up, flag it for further investigation.

Verify with Internal Teams

Once you’ve identified a potentially fraudulent transaction, loop in the right people. Check with your finance and accounting teams to confirm whether the transaction was authorized.

Sometimes, a legitimate payment might have been processed differently than usual, such as an emergency wire transfer. Before escalating the issue, make sure you have all the context.

Check Bank Statements & Notifications

Review your bank statements and transaction logs to cross-check for any related activity.

If you use a fraud detection feature, look at the flagged transaction history to see if any other anomalies occurred around the same time.

If, after reviewing all the details, the transaction still appears fraudulent, it’s time to take action.

Step 2: Immediately Secure Your Accounts

Fraudsters move fast, often attempting to extract as much money as possible before they’re detected. Your priority now is to contain the damage and prevent further unauthorized activity.

Flag the Account

The first call you should make is to your bank or financial institution. Many banks have fraud response teams that can:

Close the affected account to stop additional transactions.
Flag suspicious activity to prevent further unauthorized withdrawals.
Attempt to reverse the transaction, though success depends on how quickly the fraud was identified.

If the fraud involves a wire transfer, act immediately—once funds leave your account, recovering them becomes much harder.

Change Account Credentials

Fraudulent transactions often result from compromised login credentials, whether through phishing, malware, or internal fraud.

To shut down access, update:

Online banking passwords and ensure they are strong and unique.
PINs and security questions for any accounts that may have been accessed.
Treasury system and ERP login credentials if your organization’s financial platforms were involved.

If multiple accounts are linked, review access controls to see if other areas have been compromised.

Enable Multi-Factor Authentication (MFA)

If your treasury team isn’t already using multi-factor authentication (MFA), now is the time to activate it. Even if hackers have stolen a password, MFA makes it significantly harder for them to gain access.

For even stronger security, consider:

Implementing role-based access controls: Restrict financial system access to only those who need it.
Using a password manager: Reduce the risk of weak or reused passwords.
Reviewing user permissions: Ensure former employees or unauthorized personnel don’t have lingering access.

Step 3: Notify Your Bank or Financial Institution

Once your accounts are secured, the next step is to inform your bank or financial institution about the fraudulent transaction. Banks often have specific timeframes for reversing or holding fraudulent payments, and missing the window could make recovery much harder.

Provide Transaction Details

When you contact your bank, come prepared with all the relevant information about the transaction.

Key details to provide include:

Date and time of the transaction.
Transaction amount and currency.
Payee or account details.
Any supporting evidence, such as detection from your cash management software, email correspondence, or screenshots of the transaction.

Request a Hold or Reversal (if possible)

Depending on how quickly you caught the fraud, your bank might be able to:

Put a hold on the transaction before it clears.
Initiate a recall or reversal to recover funds already sent.

If the fraudulent transaction involves a wire transfer, especially international wires, acting immediately is critical.

While banks can’t always guarantee a reversal, early detection significantly increases your chances of stopping the payment.

Follow Bank-Specific Fraud Reporting Procedures

Once you’ve notified your bank, make sure to follow their procedures, which may include:

Filing a formal fraud report to document the incident.
Providing additional information as requested during their investigation.
Monitoring your accounts closely for any follow-up fraud attempts.

Ask for a case number or reference ID to track the progress of the investigation.

Step 4: Report the Fraud to Internal Stakeholders

Fraudulent transactions don’t just impact treasury, they can have ripple effects across accounting, finance, compliance, and leadership. Transparency and swift communication are key to minimizing further risk and preventing future incidents.

Alert Leadership

Start by notifying senior leadership so they’re aware of the issue and can assess any immediate business impact.

Depending on the severity of the fraud, you may also need to involve legal counsel and risk management teams.

Be clear about:

What happened: A brief summary of the fraudulent transaction.
Actions already taken: Steps you’ve taken to secure accounts and notify the bank.
Next steps: What the organization needs to do next, including further investigation and process improvements.

This ensures leadership can make informed decisions and allocate resources appropriately.

Engage Internal Audit & Compliance

Your internal audit and compliance teams play a crucial role in:

Investigating the fraud’s root cause: Was this an external cyberattack? Internal fraud? A process weakness?
Reviewing existing internal controls: Do approval workflows, segregation of duties, and authentication protocols need improvement?
Ensuring regulatory reporting compliance: In some cases, fraud must be reported to external regulators or auditors.

Depending on the size of your organization, this step might also involve IT security teams if the fraud stemmed from phishing or a data breach.

Document Everything

Maintaining detailed records of the fraudulent transaction is essential for:

Internal investigations: A clear paper trail helps determine how the fraud happened and what safeguards failed.
Future fraud prevention: Learning from past incidents can help strengthen treasury controls.

What to document:

A timeline of events (when the fraud was detected, actions taken, who was notified).
Copies of transaction details, account statements, and fraud alerts.
Communication logs with the bank, auditors, and internal teams.
Any evidence of how the fraud was executed (emails, login attempts, unauthorized approvals).

Step 5: Conduct a Post-Fraud Analysis

Once the immediate crisis has been managed, it’s time to step back and ask the question: How did this fraud happen?

A thorough post-fraud analysis will help treasury teams identify vulnerabilities, strengthen controls, and prevent similar incidents in the future.

Determine How the Fraud Occurred

Fraudsters exploit weak points in treasury processes, whether through cyberattacks, social engineering, or internal

To understand what went wrong, analyze:

The fraud method used: Was it business email compromise, phishing, a system breach, or internal fraud?
Access points: Who had access to the affected accounts, systems, or transactions?
Breakdowns in process: Was there a lack of oversight, missing approvals, or an exception made to a standard process?

Review Internal Controls

After identifying the cause of the fraud, it’s time to tighten security measures where needed.

Key areas to review include:

Dual approvals: Were proper authorization steps followed, or was a payment processed without secondary verification?
Transaction limits: Should lower limits be placed on high-risk payment types like wires or ACH?
Segregation of duties: Are payment initiation and approval assigned to separate individuals?
Real-time monitoring: Are treasury teams using software to flag unusual transactions before they are processed?

Enhance Employee Training

Even the most advanced fraud detection systems won’t help if employees don’t recognize red flags or know how to respond.

Consider:

Regular fraud awareness training: Educate employees on common schemes like phishing and insider threats.
Clear reporting procedures: Ensure all staff understand how to escalate suspicious activity before a fraudulent transaction is processed.

Step 6: Strengthen Fraud Prevention with Technology

To prevent future fraud, treasury teams need to go beyond manual oversight and leverage technology that enhances security, speeds up detection, and minimizes human error.

Fraudsters are always evolving their tactics.

Your fraud prevention strategy should evolve too with the right cash management software that includes fraud detection features.

Enable Real-Time Transaction Monitoring

Fraud can happen in seconds, which means treasury teams need real-time visibility into transactions.

DebtBook’s Cash Management solution includes an automated fraud detection feature that can:

Monitor transactions as they occur, flagging unusual patterns or suspicious activity.
Detect anomalies based on pre-set rules, such as transactions exceeding certain limits or payments originating from unauthorized accounts.

Instead of relying on periodic reviews, real-time monitoring helps identify fraud the moment it happens, not after the fact.

Implement Cash Management Software

Centralized cash management software is one of the most effective ways to prevent fraud

DebtBook provides:

A single source of truth for all transactions, reducing the risk of overlooked anomalies.
Customizable fraud controls that allow organizations to set transaction limits, approval workflows, and role-based access.
Audit trails that make it easy to track and investigate suspicious activity.

Instead of relying on fragmented data and manual checks, a modern cash management solution gives teams the visibility and control needed to safeguard against fraud.

Want to see how DebtBook’s fraud detection features can help? Explore our tools and strengthen your treasury defenses today.