Most businesses have established procedures for routine financial transactions. But what happens when someone requests an exception?

Perhaps it’s an urgent wire transfer, a last-minute change to vendor banking information, an expedited vendor setup, or an unexpected request from company leadership. While legitimate exceptions may occasionally be necessary, bypassing established controls can increase fraud risk and create opportunities for financial loss.

How your organization handles such exception requests can make the difference between preventing fraud and becoming a victim of it.

Pressure To Act Fast

Fraud-prevention controls work best when employees follow existing procedures carefully and consistently. Exceptions can compromise controls, especially when employees feel pressured to act quickly. For example, if asked to update a vendor’s banking information, an employee might normally contact the vendor to independently verify the change.

But what if the request includes a warning that a critical shipment will be delayed unless payment information is updated immediately? Under such pressure, an employee may skip verification.

High-Risk Transactions

Successful fraudsters often use time-sensitive requests to trigger quick decisions. Many employees are likely to help process urgent requests — even if it means bypassing established procedures — for fear of displeasing customers or their managers. Particularly risky transactions include:

Emergency Payments

Criminals might impersonate executives or vendors and request immediate transfers, citing fabricated emergencies to bypass approval procedures.

Vendor Banking Changes

Here, thieves claim a vendor has changed banks and ask employees to redirect legitimate payments to fraudulent accounts.

Unusual Refunds

Fraudsters may request refunds to different payment methods than those used for the original purchases or pressure employees to issue refunds without completing verification procedures.

Executive Overrides

Criminals could impersonate executives through email, text messages, or phone calls and exploit employees’ reluctance to challenge authority.

Formal Policy

Emergencies are inevitable, and your organization needs the flexibility to respond when they occur. A formal exception policy can help balance that flexibility with appropriate safeguards by closing control gaps. It should specify who can authorize exceptions in what circumstances and what documentation is required. Make sure your policy states which (if any) controls may never be waived by a manager.

A robust policy should instruct employees to verify exception requests independently — every time. You may also want to mandate extra review for large payments and unusual requests. Don’t forget to empower employees to question exception requests. Employees should feel comfortable delaying suspicious transactions, even if requests appear to come from senior management.

Testing Controls

Periodically review your exception records to help uncover suspicious patterns, recurring overrides, and other control gaps. Also test your controls regularly to confirm they work as intended. For example, do employees know what to do if an urgent payment request arrives near the end of the workday? What if an email that appears to be from your business’ CEO asks them to make a last-minute funds transfer?

Contact us. We can help test your policies and procedures, including your exception controls, and recommend additional protections if warranted. After all, exceptions happen, but fraud losses don’t have to.