Topic: How to prevent payroll fraud through automatic multilayer screening.

Hi Dan!  Thank you for taking the time to answer a few questions about protecting the largest cash flow for most companies, payroll.

Q: Let’s start with talking about a topic that makes most folks a bit uncomfortable. Why has payroll fraud become such a high-value target for attackers?

A: Payroll is often the single largest recurring cash outflow for any organization. Every employee has banking information on file, and that data is updated regularly through onboarding, life events, and job changes. Attackers know this.

They know payroll systems process high volumes of transactions on a predictable schedule. In many organizations, banking detail changes still rely on manual or limited verification. That combination, high dollar volume, predictable timing, and inconsistent controls, makes payroll an attractive target.

Unlike supplier fraud, where a single payment may raise a red flag, payroll transactions appear routine. That’s why fraud can go undetected for multiple pay cycles, and the damage compounds quickly.

Q: How do account takeovers and identity theft specifically impact payroll systems?

A: The impact is direct and financial, but it is also personal.

In an account takeover scenario, a bad actor gains access to an employee’s payroll profile and redirects their pay to a different bank account. The employee doesn’t receive their paycheck, the organization has already disbursed the funds, and the result is both financial loss and a breakdown in employee trust.

Identity theft takes it a step further. Fraudsters can create fictitious employees or assume the identity of a real person in order to funnel payroll dollars out of the organization.

What makes this especially challenging is that, in modern systems, these changes can appear completely legitimate on the surface. A direct deposit update looks the same whether it’s initiated by the employee or by someone who has compromised their credentials.

Q: What early warning signs indicate a payroll account takeover attempt?

A: There are several indicators that organizations should be watching for.

One of the most common is a direct deposit change submitted shortly before a pay cycle runs. Multiple banking changes within a short period can also be a signal. Updates made outside normal business hours, or changes that route to bank accounts in geographies that don’t align with the employee’s profile, should prompt closer review.

It’s also important to pay attention to situations where a new bank account fails basic validation checks — for example, if it isn’t associated with a legitimate financial institution.

The challenge many organizations face isn’t a lack of warning signs. It’s that they aren’t always structured to detect them in real time. By the time after-the-fact audits take place, the money has already moved.

Q: And how do fraudsters typically gain access to employee payroll accounts?

A: Phishing remains the most common entry point. An employee receives what appears to be a legitimate email from HR or the payroll system asking them to verify their credentials. Once that login information is entered, the attacker has access.

From there, they can log in as the employee, update direct deposit information, and simply wait for the next pay cycle.

We also see social engineering, where fraudsters call HR or benefits teams posing as employees and request banking changes over the phone. In larger organizations, where teams manage thousands of employees, verifying every request with absolute certainty can be difficult.

In many cases, attackers also exploit weak password policies or reused credentials from unrelated breaches. Across all of these methods, the common thread is the same: the fraudulent change is structured to look completely legitimate.

Q: What does “multilayer screening” mean in the context of payroll fraud prevention?

A: Multilayer screening means that instead of relying on a single check to verify a payroll change, you validate that change through multiple independent controls working together at the same time.

For example, you confirm that the bank account is real and active, screen against global sanctions lists, and validate identity information to ensure the person making the change is who they claim to be. Each of those controls addresses a different type of risk.

Bank validation helps detect fraudulent or inactive accounts. Sanctions screening reduces regulatory exposure. Identity validation helps identify potential impersonation. No single control is sufficient on its own, but together they create a much stronger defense against fraudulent payroll changes.

Q: How quickly can multilayer screening detect a payroll account takeover?

A: Speed is critical. Ideally, detection happens at the point of change — when banking information is updated — rather than after payroll has already processed.

When validation occurs in real time, suspicious updates can be flagged immediately and reviewed before funds are disbursed. That’s the difference between reactive controls and proactive prevention.

Once payroll runs and money moves, organizations shift into recovery mode, which is far more costly and disruptive. That’s why the goal should always be to prevent fraudulent changes before they ever reach payroll processing.