Stop Payment Fraud with Practical Treasury Controls
Payment fraud continues to drain millions from organizations that lack proper treasury controls. This article presents five practical strategies that treasury professionals can implement immediately to protect their companies from fraudulent disbursements. Industry experts share actionable techniques including duty separation, identity validation, and multi-tiered approval processes that have proven effective in preventing payment fraud.
Automate Checks and Confirm Changes
The challenge with payment controls is finding the balance between security and efficiency. If every payment requires multiple layers of approval, teams start looking for workarounds. If controls are too loose, fraud becomes a real risk. At Lessn, we believe the best approach is to automate verification wherever possible and apply stronger controls only when risk indicators are present. That keeps routine payments moving quickly while ensuring unusual transactions receive additional scrutiny before funds are released.
The single most effective risk reduction measure we've seen is enforcing independent verification whenever payment details are changed. Many invoice fraud attempts rely on convincing someone to update bank account information without proper checks. Requiring a separate verification step through a trusted contact method has prevented countless fraudulent payments across businesses. Combined with regular employee training that uses real examples of social engineering tactics, it creates a strong defense without adding significant delays to everyday payment processes.
Separate Duties and Slow Second Look
A finance team we know wired 475,000 dollars to a vendor they had not used in years. Everything in the accounting system was correct. The bank portal held over 1,500 vendor templates and two had nearly identical names, so the payment went out and the approver missed it because the names looked the same. The money came back, barely. The control that catches this is boring. It is separation of duties. Whoever sets up a vendor cannot be the one who releases the payment. Add positive pay so altered payee names get flagged before the check clears. One company caught a three year embezzlement that way.
What actually cut our risk was slowing down the second approval, not adding more approvers. A fast yes is the same as no control at all. You want one person whose only job in that moment is to be suspicious.
Validate Identity Before First Disbursement
We started checking vendor IDs before the first payment, and wow, what a difference. Now we get their photo ID and business license upfront, and our admin matches them to the project files. The fake invoices have pretty much stopped. Real jobs still move fast since we only check once for each vendor. If you're looking for a place to start, this is it. It's simple, keeps projects flowing, and stops most of the problems before they start.
If you have any questions, feel free to reach out to my personal email
Require Platform Issued Compliant Bills
Design approval controls by centralizing invoice issuance and tying payment authorization to platform-validated, VAT-compliant invoices. Requiring all invoices to be issued through the platform removes ad hoc email attachments and normalizes required data, which reduces social-engineering vectors without adding manual steps. The single control change that reduced our risk most was mandating platform-issued VAT-compliant invoices before any payment was approved. This approach keeps approvals fast by eliminating back-and-forth verification while ensuring the invoice meets compliance and identity checks.
Adopt Tiered Reviews and Callback Rules
Most cases of payment fraud that I've seen have occurred despite the organization having technology solutions in place. The problem is often a gap in the process that allows social engineering to take place. The attack surface is a believable email, a phony vendor name, and a member of a finance department rushing to close a payment before the end of quarter.
To stop the fraud while allowing operations, the principles include validating the instruction, not just the identity: a criminal could register a vendor's email domain with one character changed. Thus, while a phone number can be spoofed, crossing a pre-registered callback number that was set up weeks before the transaction is a harder task.
Here is how I would structure the controls:
Tiered approval based on the payment amount: Payments lower than a defined limit are approved through the standard process. Payments greater than the limit are approved by a second approver in a different reporting line. This takes five minutes to implement and stops the enormous majority of social engineering attacks.
Vendor change freeze: If a vendor's bank or payment information changes, a 48-hour wait is instituted and a phone call is placed to the original account holder on file, not to any number that might be in the request. Almost all fake invoice fraud attempts involve this last-minute account change. This one rule closed that door.
Out-of-band confirmation for first-time payees: Any payment to a payee that has not been paid before requires voice confirmation from a pre-verified contact and is not waived in the case of an emergency.
The most effective training we did was conducting a live simulation where we sent fake vendor change requests and emergency payments to our finance team and recorded who clicked without verification. Once they see that they could have fallen for it in a safe environment, they change their behavior immediately and permanently. A presentation about fraud does not create that fraud. A simulation does.
The goal is not to slow payments to a halt but to make the fraud path more difficult than the legitimate path. It's absolutely achievable with process design.
