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How Do Banks Investigate Unauthorized Transactions?


Trusting the banks to stop unauthorized transactions

Banks investigate unauthorized transactions to eliminate fraud and costly losses to businesses and individuals. But in practice, relying on banks alone is simply not good enough. Financial institutions must institute airtight fraud protection processes and solutions to maintain successfully mitigate risk and protect their brand reputation and credibility. 

But how do banks investigate unauthorized transactions? In a fast-paced world of international commerce, fast fraud detection is crucial. However, attempting to prevent and detect fraud manually is time-consuming and prone to inevitable human error. Banks use rule based detection that will flag for manual intervention if fraud is potentially detected. Yet the window for manual investigation and action is typically 30-90 days for banks, which could mean your cash is already long gone by the time the bank has done anything. Discover the role automation plays in fraud detection and prevention.

Detection is the first step toward an investigation

Proper fraud detection protocols are critical to initiating meaningful investigations and reducing fraud.  Automation from finance automation solutions automatically detects inconsistencies to find fraudulent transactions in real time - basing flags on deviations from standard policies and procedures in the invoice or payment process, as well as unexpected changes to supplier details, like payment routing or bank information. 

Additionally, the financial team works in a secure cloud environment to support collaboration and communication from any device and location. When you combine this with the banks’  policies for fraud detection you can truly harness the power of automation to find inconsistencies and initiate an investigation quickly to reduce losses.

How do banks investigate?

Banks hire personnel, such as internal credit fraud investigators, who use electronic transaction trails and account-based rules to determine the origin of fraudulent transactions. In addition, due diligence is followed when an unauthorized charge is reported by a corporation in a Suspicious Activity Report (SAR) which must be filed by the account owner within 30 days. Banks should respond by locating supporting documentation for questionable transactions.

Per current regulations, banks take between 30 and 90 days to evaluate, respond, and resolve problematic transactions. In some instances, law enforcement might be informed depending on the fraud and identity theft level.

Who is liable for credit card and ACH fraud?

Banks require merchants to refund disputed payments, such as unauthorized charges, undelivered goods or services, or charges due to errors. Then the bank charges a fee or chargeback to the merchant. 

Diligently investigating unauthorized transactions reduces these losses and supports solid business relationships. In 2021, checks and ACH debits were the payment methods most impacted by fraudulent activity. And the accounts payable department is most susceptible to business email compromise (BEC) fraud. According to The 2022 AFP® Payments Fraud and Control Survey, 58 percent of respondents reported email scams targeting their AP department. 

Protection against fraud

With investigation waiting times and a lack of scrupulation over your businesses’ unique invoice and payment operations, fraudulent transactions can create significant business losses. The fact remains, that companies cannot rely solely on banks for fraud resolution. Additionally, fraudulent transactions become a negative experience for consumers, harming the brand's reputation and future profitability.

Adopting AP automation to streamline workflows, support remote work, and detect fraud is a necessity rather than a luxury in fast-paced global commerce. In addition, adopting AP automation solutions reduces risks and costs that impact the bottom line. As a result, organizations quickly realize a measurable ROI for investing in automation to eliminate B2B fraud, protect supplier relationships, and improve brand loyalty.

Businesses must go beyond the question of how banks investigate unauthorized transactions. Management needs to adopt policies for detecting, reporting, and investigating acts of fraud and train employees on fraud detection. Investing in AP automation reduces risk and helps eliminate fraud. Contact the experts at Medius today to learn more about taking responsibility for eliminating fraud and how automation expedites the process.

Are outdated processes holding you back?

Accounts payable staff are on the front line of business change and often are tasked to implement cash flow policy changes in near real time. In many ways, AP has become the control tower for managing spend within the organization. However, many of them are stuck with legacy tools and outdated processes, creating massive inefficiencies. The real promise of AI and machine learning within accounts payable is not just streamlining processes but eliminating them. This report from IDC explores how AP automation of today is evolving to become autonomous AP of tomorrow.

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