28 Sep Best Practices to Protect Against Payroll Fraud
Recently, PEOs and other related businesses have had an increase in fraud attempts. The fraud attempts reported have been where a legitimate client signs on and runs a pay card payroll. This new client provides a FEIN and in at least one case passed a credit check, but the ACH on the first payroll came back as “insufficient funds” and the client was nowhere to be found. There are many things to consider before processing payroll with a prospective client. To ensure you are able to make an educated decision, below are best practices to help protect against payroll fraud.
Best Practices to Protect Against Payroll Fraud**:
• Beware of prospects who are pressing you to provide your services (especially payroll only) ASAP.
• Take time to research the prospective client, the company, and the employees. Make sure to research the business entity with the Secretary of State where the business is located. Google is your friend.
• Require secured funds for payroll payments from new clients. Wire transfers are a commonly used method in the industry.
• Set up a call with the bank and the client (and get the contact information for the bank from a source other than the client.)
• Consider requiring an up-front deposit or onboarding fee.
• Beware of prospects who are unwilling to participate in a face-to-face meeting.
• Pay card requests for an entire workforce are suspicious, too.
• Educate your employees on the process within your PEO on vetting prospects. Make sure to have a gatekeeper who monitors the prospects/new “clients” and understands the warning signs of suspicious behavior.
If you are a target of a scam, please consider making a complaint to the FBI’s Internet Crimes Complaint Center (IC3). IC3 ensures access to the complaints by all of the FBI’s field offices, which is important when victims are across the U.S. The website is www.ic3.gov.
** Best practices provided by NAPEO. Their Accounting Practices Committee has met and is creating a best practices resource for members to use.