Homeowner associations face a growing number of fraud and cybersecurity threats that pose serious risk to their operations, their relationships with their homeowners, and their financial well-being. Understanding how these attacks occur and learning strategies to prevent them can reduce risk and help keep your association secure.

The risk landscape

Fraud and embezzlement have been long-standing threats for homeowner associations, while cybersecurity risks are relatively new. Understand the methods criminals frequently use to help you identify problem areas and reduce your exposure to fraud.

Payment fraud has become pervasive, with 80% of organizations reporting they’ve been a target. Checks are particularly susceptible—65% of organizations say they have been victims of check fraud. Fewer organizations reported scams involving other types of payment: ACH debits (33%), wire transfers (24%), commercial credit cards (20%), and ACH credits (19%).Disclosure 1

Business email compromise (BEC) is a primary source of attack. Finance teams who manage payments and accounts payable are primary targets.Disclosure 1 Fraudsters often use social engineering to trick employees into providing sensitive information, making fraudulent payments, or opening attachments that contain malware.

Embezzlement persists as an established threat to associations’ financial health. Limited oversight of an association board or management company creates inviting conditions for theft. Entrusted parties sometimes abuse their positions, siphoning funds by falsifying invoices, diverting payments, or manipulating financial records.

Cybersecurity threats are growing as associations increasingly communicate online and adopt digital payment platforms. While convenient and efficient, electronic payments create new routes for cybercriminals to infiltrate and exploit. And the rise of remote work poses additional cybersecurity challenges.

Hackers attack homeowner associations, hoping to steal sensitive data, disrupt operations, or extort ransom payments. Their favored methods include:

  • Phishing
  • Malware
  • Ransomware
  • Data breaches

Robust cybersecurity defenses are important. But even with strong security, cybercriminals could gain access to your HOA.

Third-party vendors, partners, and outsourcers can put you at risk, particularly if they’ve been a victim of fraud, BEC, or don't have the same controls in place as you.

Identifying fraud quickly is the key to mitigating damage. A recent survey found that 31% of organizations took between one and four weeks to identify fraud, while 22% took a month or more.Disclosure 1

Commitment to cybercrime and fraud prevention

HOA board members and management company staff are your first line of defense. Commitment from leaders to stretch defenses, prepare for attack, and make fraud awareness and prevention a top priority will help keep your association safe.

Initiate your defense program with:

Education. Begin ongoing training for all staff and board members to help them recognize and respond to fraud—including the latest schemes and tactics.

Legal advice. Engage legal counsel to ensure you’re taking the right steps should you suspect or encounter fraud. You’ll want clear procedures for investigating, documenting, and responding to fraudulent activities.

6 best practices to anchor your defenses

For maximum impact, your fraud prevention program should include clearly defined financial and cybersecurity processes. You can safeguard association finances by implementing strong controls and best practices including:

1. Prioritize financial oversight.

  • Conduct regular audits and account reconciliations.
  • Get periodic independent reviews of financial records.
  • Segregate financial duties to prevent any one person from having unchecked control over financial transactions.
  • Control access to HOA bank accounts and credit cards.
  • Perform multiple reviews of each invoice.
  • Block wire and ACH activity on accounts not designated for those purposes.

2. Replace checks with safer, electronic forms of payment.

Commercial credit cardsACHwire transfers, and Real Time Payments (RTP®) are the primary electronic payment methods used by association managers. If you have to use checks, fight check fraud with check fraud tools, like Positive PayPayee Positive Pay, or Reverse Positive Pay.

3. Move to an integrated payables platform.

In many cases, you can send all vendor payments to your bank in a single, secure, online electronic file. The bank then applies predefined criteria to distribute payments, flagging any irregularities. (Not all association management systems can produce these files.

4. Strengthen wire payment authorizations and approvals.

  • Confirm emailed or faxed instructions to send a wire transfer.
  • Use voice verification, with an authorized person, at a known phone number, to confirm wire instructions.
  • Implement dual control—one person receives instructions, another authorizes releases.
  • Use the bank’s wire template for repetitive transactions.
  • Question urgent requests.

5. Follow secure ACH procedures.

  • Verify authenticity and ownership of bank routing and account numbers.
  • Separate file processing from file creation and maintenance.
  • Restrict access to payment data forms and records.
  • Use Truist ACH Fraud Control to set parameters for allowed transactions and receive daily activity reports.
  • Perform daily reconciliation on ACH debit accounts.

6. Adopt cybersecurity best practices association-wide.

  • For board members and management company staff:
    • Don’t open suspicious emails or email attachments from questionable sources.
    • Be careful sharing information that cybercriminals could use to compromise the HOA.
    • Only use secure networks and internet connections when conducting business online.
    • Verify any suspicious or unusual requests coming from other members or staff, including vendors, suppliers, or other business partners.
  • For technology platforms:
    • Keep technology systems, devices, and software updated with the most current versions and security patches.
    • Back up data regularly.
    • Make sure only authorized individuals can access devices and sensitive data.
    • Use single sign-on systems (SSO).
    • Mandate strong passwords and require two-factor authentication.
  • Conduct thorough due diligence around your vendors’ cybersecurity defenses and employee training.
  • Establish a cyberattack response plan, review it regularly, and update it as needed.
  • Get cyber insurance.

Stop fraud and cyberattacks before they begin.

The risks of fraud and cyberattack are likely to keep increasing as criminals adopt more sophisticated methods. Focus on prevention and best practices to help your association stay strong, secure, and financially stable in the face of these rising threats. Reach out to the Truist Association Services team for help shoring up your defenses. Call us at 888-722-6669, or visit Truist.com/AssociationServices

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Talk to your Truist Association Services relationship manager about how Truist can help meet your financial needs. To learn more, contact us at 888-722-6669 or visit us at Truist.com/AssociationServices.

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