In a world where fraud can cripple even the most prominent organizations, CEOs must prioritize this issue.
The scale and sophistication of attacks have created new challenges for businesses. They must shift from reactive and siloed fraud mitigation to a proactive, customer-centric, integrated, and continuously evolving approach.
Know Your Customers
The know-your-customer (KYC) process is essential to a financial institution’s anti-money laundering and counter-terrorism financing (AML/CFT) policies because it helps to eliminate suspicion. It prevents organizations from acquiring and doing business with people who pose risks to financial institutions’ reputation and bottom line.
A successful KYC process requires a deep understanding of regulations and compliance requirements. For example, it includes searching available lists and databases to verify that customers aren’t listed as politically exposed persons (PEPs).
Businesses also need to ensure that they have reliable and extensive record-keeping procedures. This should include collecting and preparing receipts for bank deposits.
Failing to meet these standards could cost your business a lot in fines, lost sales and reduced customer satisfaction. In addition, customers view a lack of identity verification practices as untrustworthy and more likely to expose their information to fraud. Good thing there are ways to mitigate these, but sometimes, customers would also abuse their rights, especially when it comes to credit card chargebacks. Businesses could stop chargebacks if it’s from an entirely legal sale.
Knowing yourself is one of the most crucial ways to fight fraud. Knowing yourself empowers you to make the right decisions, build stronger relationships and become a better person.
It also helps you avoid making mistakes that will cost you money in the long run. It gives you a clearer understanding of your personality, values and strengths and allows you to create a life that fits you.
Another way to know yourself is to practice meditation. It is an ancient technique that helps many people to find themselves and heal their minds.
You can also observe your employees and customers to detect suspicious behavior indicating fraud risk. Consumer rights are unquestionably necessary, but businesses also have the right to defend themselves against customers’ false accusations. For example, merchants should distinguish between legitimate and fraudulent chargebacks. They have the credit card chargeback merchant rights to do this because illegal chargebacks must always be resisted via the representation process.
Know Your Employees
Knowing your employees can help spot fraud risks, like stopping chargebacks and protecting your business. For example, if an employee suddenly becomes withdrawn or irritated with their boss, this can be a red flag.
Additionally, if an employee is suddenly close to a vendor or customer, this can indicate bias and connivance. In addition, if an employee starts working late or on weekends, this could also be a sign of a problem.
Regardless of size, employee fraud is more common than most business owners realize. Recognizing the risk and fighting it before it’s too late is essential.
Know Your Vendors
Vendors are key players in any company’s supply chain, so it’s critical to know them well. When you do, you can prevent fraud from happening and mitigate the costs it could cause.
Vendor due diligence (VDD) is collecting and evaluating information about your vendors that confirms they’re licensed to do the work you need them to, comply with regulations, and don’t have any criminal records or affiliations that pose a risk to your organization.
The VDD process also helps you establish a risk profile for each vendor that can help you determine which ones to work with.
You can do this by thoroughly reviewing the company’s financials and conducting other relevant research. This includes checking significant assets, principal owners, and loans. You can also look into pending lawsuits or compliance violations and check for past fraud activities.