Financial Risk - Do You Know Who You Are Paying Through Internet Banking?

Financial Risk #5

Are you sure who you are paying?

Do you know who you are paying through internet banking?  

The signatories who released payments at one organisation thought they were paying the South African Revenue Services (SARS) - after all, when they looked at the bank account name on their Internet banking system, it read ‘SARS’. However, many months later, they found that they owed SARS a large amount of money; when they asked for an explanation as to how this could be, the bookkeeper disappeared – as had a large amount of the organisation’s money. This happened because, although the payee name showed as ‘SARS’, the account number into which funds were paid was actually a private account linked to the bookkeeper. It is only the account number, and not the name, that is verified by the banks’ systems.

Make sure your payment is reaching the intended party.

With this in mind, how do you currently confirm the bank account details of those you are paying through internet banking? Perhaps you don’t and you simply rely on the bank to verify a bank account number against the payee name? Perhaps you do by using electronic copies of invoices or details sent in an email or referred to in a phone conversation?

In our view, you cannot rely on these methods of ‘confirmation’ to be a sufficient safeguard against fraud.

We advise all our clients to verify;

  • the bank account details of every new beneficiary that they enter onto their Internet banking system; and
  • every change they make to bank account details on their Internet banking system.

This should be done by obtaining original bank documentation from every supplier (such as an original bank statement, a cancelled cheque or an original bank-stamped letter). Why ‘original’ - well, for those that know how, it is not difficult to manipulate/change electronic documents or emails or to give false but convincing details in a telephone conversation. [This even applies when using bank statements drawn from the Internet – ensure that you have original bank statements when reconciling the organisation’s bank balances at each month-end.]

We do see that banks are now beginning to provide an account verification service through internet banking (for which a small charge is made every time it is used) and this may become a more cost-effective way of verifying bank account details. Whether it does or not, now is the time to ensure that all payments are made to bank accounts that have been fully verified - this significantly reduces the risk of payment fraud.

We do hope that you will find this advice helpful and that you will contact us if any of our services would assist you in safeguarding the organisation’s hard-earned financial resources.

For more about CMDS, refer to www.cmds.org.za.
 

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