1. Access National Bank Nonprofit and Association Banking 1
Preventing Nonprofit Banking Fraud and the Tools You Can Use! 2.
Introductions Tom Ciolkosz Vice President, Relationship Manager
Joined Access National Bank in 2009 as a Vice President,
Relationship Manager and is the lead manager for the CPA and
Nonprofit/Association segment teams with over 25 years of
experience in the banking industry He is a resident of Loudoun
County and is very involved in the community Past President of his
Rotary Club and is currently serving as a Chair of Public Relations
Member of both the Public Policy and Non Profit Initiatives Tom
serves as a Board of Director for Loudoun Interfaith Relief and
Brain Injury Services 2 3. Our Performance Record Organized in 1999
by local area business professionals and bankers Headquartered in
Reston, VA with five banking centers: Reston, Vienna/Tysons,
Chantilly, Leesburg and Manassas Our financial performance is
attributed to our exceptional clients and our excellent client
service o Consistent profits, quarter after quarter o 5-Star Rating
(Superior) from Bauer Financial in each quarter since 6/30/2014
Public company known for our financial strength and traded on the
NASDAQ global market (ANCX) Over 1 billion dollars in assets 3 4.
The Access Value Proposition Hosting educational seminars and
networking opportunities are an integral part of ANBs strategy to
help our clients grow their business. Involvement by our associates
in various associations that are relevant to the nonprofit and
association industry. o Greater Washington Society of CPAs o
Financial Administration Roundtable o
www.nonprofitaccountingbasics.org o ASAE o The Nonprofit Roundtable
4 5. Preventing Nonprofit Banking Fraud and the Tools You Can Use!
Agenda Fraud Statistics Fraud Articles The Fraud Triangle Real
Fraudsters Check Fraud ACH Fraud Further Controls Resources 5 6.
Preventing Nonprofit Banking Fraud and the Tools You Can Use
Statistics 10% of fraud occur in not-for-profit organizations It
typically lasts 18 months Approximately 55% were committed by
single individuals Median loss of $100,000 Primary Areas of
Weaknesses* Lack of Controls Override of Existing Controls Lack of
Management review Poor Tone at the top *One of these factors was
present in over 80% of the cases studied 6 * According to the
Association of Certified Fraud Examiners 7. Preventing Nonprofit
Banking Fraud and the Tools You Can Use 7 * According to the
Association of Certified Fraud Examiners 8. Washington Post Inside
the hidden world of thefts, scams and phantom purchases at the
nations nonprofits 8 By Joe Stephens and Mary Pat Flaherty October
26, 2013 For 14 years, the American Legacy Foundation has managed
hundreds of millions of dollars drawn from a government settlement
with big tobacco companies, priding itself on funding vital health
research and telling the unadorned truth about the deadly effects
of smoking. Yet the foundation, located just blocks from the White
House, was restrained when asked on a federal disclosure form
whether it had experienced an embezzlement or other diversion of
its assets. 9. Washington Post Inside the hidden world of thefts,
scams and phantom purchases at the nations nonprofits 9 Legacy
officials typed yes on Page 6 of their 2011 form and provided a
six-line explanation 32 pages later, disclosing that they became
aware of a diversion in excess of $250,000 committed by a former
employee. They wrote that the diversion was due to fraud and now
say they believe they fulfilled their disclosure requirement. 10.
Washington Post Inside the hidden world of thefts, scams and
phantom purchases at the nations nonprofits 10 Records and
interviews reveal the full story: an estimated $3.4 million loss,
linked to purchases from a business described sometimes as a
computer supply firm and at others as a barbershop, and to an
assistant vice president who now runs a video game emporium in
Nigeria. Also not included in the disclosure report: details about
how Legacy officials waited nearly three years after an initial
warning before they called in investigators. 11. Preventing
Nonprofit Banking Fraud and the Tools You Can Use! 11 The Virginia
Scholastic Rowing Association in Alexandria said it lost as much as
$223,000 an estimate the association president now has raised to
$500,000 to a longtime bookkeeper, later convicted of embezzlement.
People are going to say, You stupid people, said the groups
president, John D. White. Theyre exactly right. You have to pay
attention. 12. Preventing Nonprofit Banking Fraud and the Tools You
Can Use! Real Fraudster or do you really know? 12 13. Preventing
Nonprofit Banking Fraud and the Tools You Can Use! Fraud is a
deception deliberately practiced in order to secure unfair or
unlawful gain (adjectival form fraudulent; to defraud is the verb).
The two main types of fraud Misappropriation of assets theft of
company's assets Fraudulent financial reporting misrepresentations
in financial reports 13 14. Preventing Nonprofit Banking Fraud and
the Tools You Can Use! When it comes to banking, many types of
fraud schemes are out there, and new types are being engineered
every single day. The fraudster typically will test their scheme
with a small amount to see if the transaction goes through
unnoticed and then gradually increases it to the bigger payday.
Fraud is happening both externally by hackers and vendors and
internally by employees who are improperly scanning checks for
payment 14 15. Check Fraud Problem: Through remote deposit capture
or mobile phone deposit technology, check fraud involves
individuals double debiting. For example, an organization issues a
check to an individual and the individual deposits the check
through a scanner or smartphone. The individual then quickly takes
it to another bank to cash it. Both transactions flow through the
check clearing process, which could result in the account being
debited twice. This could go undiscovered until the account is
reconciled. 15 16. Check Fraud Another way is for the fraudsters to
get access to your money is to create counterfeit checks through
stealing your check stock or obtaining a legitimate check and
copying it. Solution: Check Positive Pay - This is an antifraud
service offered by banks to help protect businesses against fraud
from altered and counterfeit checks. Positive pay assists in the
creation, transmission, and research of check records sent to the
bank for payment. 16 17. ACH Fraud Problem: The fraudster targets
nonprofit organization accounts in search of bigger payouts.
Fraudsters will steal online banking credentials by hacking
computer networks and installing key logging software or malware.
Once the thief has the right credentials, they can access the
organization's accounts and send out wires or ACHs to another
country and into their own bank accounts. Solution: ACH Positive
Pay - This allows clients to assign filtering or blocking services
to various accounts based on company IDs, standard entry class
codes, and dollar amounts. 17 18. Further Controls Protect your
online environment 18 Be sure your bank uses a Two-factor
authentication process. The best way to utilize a two factor
authentication communication is: Email Cell Phone Phone 19. Further
Controls Protect your online environment 19 TrustDefender secures
your connection to Access National Bank transactional websites.
TrustDefender protects your Access National Bank transactional
banking session by locking down your browser and blocking all other
internet traffic, including email. It also isolates unknown
software and programs including viruses, malware, trojans and
spyware on your computer that can steal your identity or carry out
fraud on your account. TrustDefender identifies and alerts you to
risks on your computer. Handout Online Banking Data Security and
You 20. Further Controls Protecting your Online Environment 20
Social engineering, in the context of information security, refers
to psychological manipulation of people into performing actions or
divulging confidential information. Phishing is a type of social
engineering. Phishing, relates to acquiring that confidential
information by masquerading as a trustworthy entity in an
electronic communication. *Handout-Phishing for Red Flags 21.
Further Controls 21 Educate your employees A strong security
program should be paired with employee education about the warning
signs and safe practices that you can implement. The best secure
password is: Password 1234 May2009marie S97@fde 22. Further
Controls Partner with your bank to prevent unauthorized
transactions 22 Talk to your banker about programs that safeguard
you from unauthorized transactions. Positive Pay and other services
offer call- backs, device authentication, multiperson approval
processes, and batch limits to help protect you from fraud.
Positive Pay ACH Filters 23. Further Controls Partner with your
bank to prevent unauthorized transactions Positive Pay An
anti-fraud service offered by banks to help protect businesses
against altered checks and counterfeit check fraud. The system
matches the account number, check number, and dollar amount of each
check presented for payment against an Issued File(s) submitted by
the business. Any mismatches with the three components will create
an exception item that will enable the business owner and clients
to make a decision to pay or return the check 23 24. Further
Controls Partner with your bank to prevent unauthorized
transactions ACH Positive Pay Designed to protect business-client
accounts from unauthorized electronic charges. Two methods of
protecting your organization are detailed below. Solution: ACH
Blocking All ACH debit transactions are blocked and clients make
daily pay or no- pay decisions for each item. Solution: ACH
Filtering Automatic payment of ACH transactions is based on
pre-established organization IDs, Standard Entry Class, or dollar
amounts. The client makes a decision to return or pay any exception
items. 24 25. Further Controls Pay attention to suspicious activity
and react quickly 25 Look out for unexplained account or network
activity, pop ups, and suspicious emails. If detected, immediately
contact your financial institution, stop all online activity and
remove any systems that may have been compromised. Do you perform
bank reconciliation on your operating account? Monthly Weekly Daily
Quarterly 26. Further Controls Understand your responsibilities and
liabilities The Electronic Funds Transfer Act (EFT), also known as
Regulation E, was implemented in the U.S. in 1978 to establish the
rights and liabilities of consumers as well as the responsibilities
of the financial institution in EFT activities. Regulation E covers
a consumer under certain conditions, limiting loss to $50 if the
institution is notified within two business days. There currently
are no similar loss protections for commercial customers 26 The
account agreement with your bank will detail what commercially
reasonable security measures are required by your organization. 27.
Resources You can also visit the following websites to learn more
about how to protect your nonprofit organization: ACFE Fraud
Prevention Check Up - Handout Greater Washington Society of CPAs:
Nonprofit Accounting Basics -
http://www.nonprofitaccountingbasics.org/topic/internal-controls
Federal Communications Commission: 10 Cybersecurity Strategies for
Small Business
https://www.uschamber.com/sites/default/files/legacy/issues/defense/fi
les/10_CYBER_Strategies_for_Small_Biz.pdf 27 28. Contact
Information Tom Ciolkosz Vice President Nonprofit Relationship
Manager Access National Bank 1800 Robert Fulton Dr Reston, VA 20191
Direct: 703-871-1045 [email protected] 28
