How To Mitigate The Risk Of Signature And Signatory Fraud

Despite the increased adoption of digital technology over the last decade, the majority of businesses still rely on signatures to authenticate transactions. Signatures are required for a variety of fundamental business tasks, including signing checks, authorizing papers and contracts, approving transactions, and verifying actions. However, the higher the signature requirement, the greater the possibility of signature fraud. Furthermore, as organizations transition from manual to electronic signatures, this danger is only projected to grow.

While e-signature platforms provide for greater flexibility in signing, they are still vulnerable to the fundamental risk of who has authority to sign, which is especially relevant in circumstances when individuals sign on behalf of a company.

Signature forgery is a concern, but so is the representation of the signature, i.e. the signatory, and, more particularly, whether or not this signatory is lawfully authorized to sign.

Can the apprentice sign the term sheet for a take-over?

It’s critical to maintain track of who is authorized to sign (for what) on behalf of the organization as employees change roles, leave, and new ones join.

So, how can you ensure that all of your company’s signatures and signatories are authorized and current? Let’s take a look at what signature fraud is and how it varies from signatory fraud before we address this issue.

What is signature fraud?

Signature fraud, often known as forging, is a crime that includes falsifying another person’s signature. Bear the following definitions in mind as we go ahead:

SIGNATORY: signatory (to/of something) a person, a country, or an organization that has signed an official agreement

SIGNATURE: your name as you usually write it, for example at the end of a letter

What is a legal signature?

Signatures must be completed in writing or via a piece of electronic equipment or device, according to the legislation. They can be made up of any type of mark, word, or symbol. If a person signs a contract without the consent of the other party, the signature is considered void and does not bind the document or agreement. The intent of all parties engaged in the transaction should be obtained before signing a contract.

Commonly forged documents

Here’s a detailed list of the most commonly forged types of documents:

• Checks
• Money orders
• Deeds
• Titles
• Securities
• Bonds
• Court Seals
• Currency
• Corporate documents
• Documents used in identity theft

Types of signature forgeries

Signature fraud is defined as the falsification of a signature on a document. However, there are three types of signature fraud.

• Random/Blind forgery

  This sort of forgery occurs when the forger does not have access to the authentic signature, resulting in a counterfeit signature that has little or no resemblance to the actual one.

• Unskilled (Trace-over) Forgery

  This forgery is traced over, leaving a tiny imprint on the piece of paper underneath.

• Skilled forgery

  This is, as one might think, the most difficult sort of fraudulent signature to verify. In most situations, it’s created by a criminal who has access to one or more legitimate signature samples and can accurately imitate them.

“The average organization loses 5% of its revenue to internal fraud.”

What is signatory fraud?

Signature fraud is not the same as signatory fraud. This occurs when someone signs on behalf of an organization without being authorized to do so. For example,

• Someone proves their authority to sign by tampering with the register of authorized signatories or the list of approved signatories.
• Someone who has left a job stays on the company’s Authorized Signatory List and thus maintains the authority to sign documents incorrectly.
• Due to a lack of safeguards, communication, and awareness of signing authorities, signature fraud may occur without intent.

How to prevent signature and/or signatory fraud

Although completely avoiding all fraud is impossible, good early detection and authentication internal rules and procedures can considerably limit the impact of fraud.

• Some best practices for validating signatures and signatories are listed below:
• Maintain an up-to-date, conveniently accessible list of authorized signatories.
• Ascertain that procedures are in place to prevent tampering with the signatory list or the registration.
• Make a formal internal signature procedure/policy, and think about include any anti-fraud controls and compliance procedures.
• Adopt a dual-control system for authorizing transactions, and make sure that the same person cannot post and approve transactions at the same time. If feasible, have a senior finance staff member examine and officially authorize any changes to payment and bank account details for payment transactions.
• Consider using a cloud-based e-signing platform to make the process easier, as well as a signatory authorization platform to offer an extra degree of protection, so you can keep track of any changes to your signature data.

What is an authorized signatory or signer?

With Cygnetise’s new “time machine” feature, signature verification has never been easier.

How can businesses verify that all of their signatures are properly authorized, and what happens if a signatory’s authority needs to be reviewed in the past?

In addition, how do signatories know what they are authorized to sign?

Traditionally, authorized signatory lists or registers were kept on paper or in simple computer files. The blockchain-based system offered by Cygnetise is significantly more efficient and secure, allowing businesses to manage signature lists in real-time. The added benefit of having an immutable digital audit record of all modifications made to the signatory data is also a plus.

Cygnetise’s development team has designed functionality that allows users to restore signature lists and statuses retrospectively and so identify permission levels at a certain period using this capability of blockchain technology (to the minute).

Why is this important?

This functionality considerably simplifies the process of dispute settlement should one arise, in addition to the obvious benefits of efficiency and security. For example, suppose someone has signed a legally binding document without being authorized to do so.

Adopters of the application now receive confidence (and insurance) that they would not have had otherwise. The Blockchain’s unchangeable nature makes the verification of signature data unassailable, saving time and money while also enhancing confidence in an organization’s governance operations.