6 Best Practices to Consider for Fraud Monitoring

Fraud prevention is not a one-time process; it’s an ongoing effort that companies must undergo to keep themselves and their customers secure. Because of this, we encourage our business partners to implement the latest and best practices in preventing fraud, as recommended by Nacha and other fraud prevention specialists.

To comply with upcoming Nacha rule changes and enhance your fraud prevention, we encourage you to consider the following:

1. Develop Risk-Based Monitoring Programs:
   • Tailor fraud detection processes based on the transaction volumes and risk profiles of the customers you serve.
   • Regularly assess and update these programs to address emerging threats.
2. Implement Fraud Detection Tools:
   • Utilize real-time transaction monitoring systems capable of identifying unusual patterns and behaviors.
   • Use advanced analytics and machine learning to detect potential fraud, such as payroll diversion, increases in activity in a short time frame, payroll amounts not consistent with industry type, etc.
   • System generated alerts can help identify potential risks such as duplicate payments or unexpected changes in payroll data.
   • Velocity checks can monitor the frequency and volume of transactions to detect and prevent strategies used to evade limits or thresholds.
3. Enhance Customer Due Diligence (CDD):
   • Strengthen onboarding procedures to verify customer identities thoroughly. Know the expected activity of your customers.
   • Integrate Customer Identification Program and Know Your Customer procedures to ensure that funds originate from authorized and verified sources.
   • Ensure customer’s industry type is not on Kotapay’s prohibited originator list.
   • Monitor transactions for signs of suspicious activity.
4. Conduct Training and Awareness Programs:
   • Educate staff on the latest fraud schemes and detection techniques.
   • Promote a culture of vigilance and prompt reporting of suspicious activity.
5. Comprehensive Audit Trails and Reporting:
   • Maintain detailed records of all transactions, monitoring results, and any remedial actions taken.
   • Generate periodic reports that summarize key fraud indicators and any incidents.
6. Review and Update Policies and Procedures
   • Ensure internal policies align with the new Nacha requirements.
   • Document all fraud monitoring processes and maintain records of compliance efforts.

If you have any questions, we encourage you to reach out to the Kotapay Risk Department. Our team would gladly assist you in becoming familiar with and implementing these best practices for fraud prevention.

To learn more about the upcoming Nacha rules, visit https://kotapay.com/rules.