The Cost of Cyber Fraud in Payment Processing: A Wake-Up Call for Law Firms

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Cyber-attacks are on the rise in all categories of businesses, with technology improving at rapid rates, criminals are finding new ways to breach your security systems and steal your data. As of the 4^th of April, the ACCC’s Scamwatch, over 57,000 Australian businesses have reported a combined $96 million to scams in the first quarter of 2023 alone. It’s clear that cyber-attacks and fraud attempts are a growing threat to organisations in all industries, including law firms.

Cybercriminals can range from individuals or organised groups aiming to steal money or sensitive information, illegally access hardware or data, or even disrupt business operations. Threats to your firm can come from clients, competitors or current/ former employees who can compromise sensitive information accidentally or intentionally. The costs of cyber-attacks can be devastating. By creating financial losses, damage to reputation and the cost of getting systems back up and running or even purchasing new, more secure systems.

Due to the nature of law firms, handling multiple invoices and data at one time at a rapid pace, they need to be particularly vigilant when processing payments for matters, shared services, GL and class actions. Cyber fraud can have serious consequences for law firms of all sizes, creating the need to take proactive measures to prevent it from occurring in the first place. So, what can your firm do to prevent cyber fraud, and what should you do if you suspect it?

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What is Cyber fraud in Payment Processing?

Cyber fraud in payment processing occurs when cyber criminals use a range of various tactics to gain unauthorised access to your firm’s financial information or divert your payments to fraudulent accounts. The most prevalent forms of cyber fraud are invoice fraud, payment diversion and phishing scams.

In some cases, fraudsters may send fraudulent invoices to a law firm, often disguised as legitimate by posing as a supplier or client. This is done to trick accounts teams into making payments to fake accounts held by scammers. Payment diversion often involves the interception of legitimate payments and the redirection of them to other accounts. Lastly, phishing scams will involve the use of fraudulent emails or websites used to trick employees to reveal their login credentials, which can then be used to access sensitive information.

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The Cost of Cyber Fraud

The financial and reputational costs of cyber fraud in law firms can be significant. In the aftermath of a cyber-attack, firms may not only lose financially but also suffer a decrease in reputation and an effect on relationships with suppliers and partners.  

The time and investment that is required to notify authorities of the incident can also be costly and a loss of time. The time aspect can result from digging up old bills, invoices and audit trails to find the source of the attack, especially if the firm is still using paper-based accounts payable systems.

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How Law Firms Can Prevent Cyber Fraud in Payment Processing

To prevent cyber fraud in payment processing, law firms should look to implement impenetrable technology as well as policies and procedures to detect and prevent fraud. The ACSC reported the top security measures that businesses should consider to prevent a cyber-attack.

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Some of these security measures include:

• Multi-factor authentication and single-sign on
• Regular cloud backups
• Business continuity and disaster recovery plans
• Continuous incident detection and response

Cloud-Based payment automation software can perform these security measures to safeguard against cyber fraud. This is done by performing various security measures that are built into the software. Cloud-based accounts payable software offers the capability of multi-factor authentication to ensure logins are coming from a legitimate user by providing texts and emails with authentication codes to ensure secure access to firm software. Regular backups are performed in cloud-based systems with some automatically syncing every 15 minutes which is an effective approach to ensure all actions are logged and data is stored safely.  

Additionally, cloud-based automation can perform integrity checks, to verify the authenticity of all invoices and payments before authorisation. The implementation of a secure payment platform that can easily integrate with firm management software provide law firms with efficient and protected accounts payable processes that are cyber fraud-proof.

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Some Payment Automation software offers the following benefits.

• Verifying the authenticity of all invoices and payments before authorising them.
• Setting up multi-level authorisation for all financial transactions.

• Regularly reviewing invoices to identify and address any vulnerabilities.
• Providing regular staff training on the risks of cyber fraud and how to respond to it.

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What to do if you Suspect Cyber Fraud in your Finance Department

If you suspect cyber fraud is occurring in your finance department, it is essential to act fast. Firms should report the incident to the ACCC and the ACSC as well as relevant authorities such as the police. Firms should then work with IT and legal professionals to investigate the incident and mitigate the overall damage. It is also essential to notify all clients and suppliers of the incident as soon as possible to prevent further damage to the reputation of your firm.

In conclusion, the prevalence of cyber fraud in payment processing is growing and becoming more of a threat to law firms. By implementing robust policies and procedures, training staff and using innovative technology to detect and prevent fraud, firms can protect themselves from the devastating effects of cyber fraud.