LOUISVILLE, Ky. (October 14, 2009) - It has been said that the best defensive plan is an
offensive one. The saying is true for any situation in which information is
available to stop problems before they start, especially in the business world.
In 2003, the Federal Trade Commission (FTC)
announced it would be applying the same proactive principal to the widespread
problem of identity theft and business fraud. By implementing mandatory standards of fraud security, the
FTCs Red Flags Rule hopes to protect both businesses and consumers nationwide
and fight back against hackers and identity thieves.
However, as with any attempt at mass standardization, the Red
Flags Rule has been turbulent to introduce. The date by which all affected
businesses are expected to comply has been moved twice since the rule was
announced. Many businesses claim that the language of the rule has made them
confused as to how to achieve compliance, or if their industry will be
affected. The FTC has since increased its awareness programs, breaking Red
Flags compliance down into four easy steps.
In this article, we will discuss the four steps of Red Flags Rule compliance, and how each is an opportunity for your business to
take a proactive role in the fight against business fraud.
Step One: Identify
Every business industry has it own unique set of potential
red flags, or indicators of potential business fraud. Before you can implement a successful program to detect and
prevent red flags, its essential to first identify suspicious activity unique
to your corner of the business world. The FTC provides a series of categories
to consider when building a list of relevant red flags, but also urges business
owners in this stage to pay special attention to the details of the accounts
they manage on a daily basis. What sort of accounts your business deals
withhow they are accessed, managed and changedwill play an important role in
helping you decide how you will focus on attempts at fraud on your business.
Step Two: Detecting
Relevant red flags may exist in two places: new customers
and existing customers. Its important to have procedures in place to identify
both new and current fraudsters in a way that is not disruptive to your daily
business. Comprehensive identity verification and identity authentication systems, when paired with reliable data sources, can be
essential tools in helping your business detect fraud. But, there is no
universal detection system that will work for everyone. Depending on your
industry and the sensitivity of your accounts, you may wish to pull consumer
data from multiple sources or invest in an authentication or verification
service that covers several different means of making sure your customers are
who they say they are. It all depends on what works best for your business.
Step Three: Mitigate
If you encounter a red flag, its important that your
business and employees are aware of what steps must be taken to properly
mitigate the threat and reduce the opportunity for it to happen again. The
appropriate response may depend entirely on the situation, the nature of your
business and the nature of your red flags detection program. The FTC offers a
set of guidelines for dealing with red flags and fraud encounters, but as the
business owner or operator, the situation is truly in your control. Its up to
you to determine the best course of action to protect your business, your
employees and your customers.
Step Four: Maintain
The methods with which identity thieves and fraudsters
attack businesses change on a daily basis. Its essential for all Red Flags
compliant businesses to keep their fraud prevention systems up to date with
current industry knowledge in order to keep their prevention programs sharp.
While a reliable data provider will stay up to date with consumer information,
its up to you and your business to identify which methods are most effective
and which should be evaluated or updated for maximum impact on your unique
The Red Flags Rule is simple in and of itself. By following
these four easy steps to compliance, youll be building a system that will
effectively prepare you and your employees to prevent, mitigate and report
fraud in your daily business. Your system will reach beyond the walls of your
business and impact your business partners and customers alike. By being
proactive, youll be doing your part to keep transactions honest and customers
confident in their decisions to bring their business to you.Electronic Verification Systems, an industry leader with more than 10
years of data provision and fraud prevention
experience specializes in integrating identity verification and authentication
procedures into established business security structures. We can help you
detect and prevent identity fraud, making our solutions ideal for those seeking
to become Red Flags compliant.