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Fraud in Plain Sight: What Community Association Finance Leaders Must Do Now
Payment fraud is an everyday reality for community associations. And for many CAI members, the most dangerous aspect isn’t just the volume of attacks, but how easily they blend into routine financial operations.
The uncomfortable truth? Fraud isn’t always breaking in from the outside. Increasingly, it’s slipping through the cracks of familiar processes: emails, invoices, and payment requests that look legitimate at first glance.
The Risk Is Higher Than Many Realize
A recent study by WBR Insights and Edenred Pay shows that 45 percent of property management companies have experienced payment fraud attacks in the past year, yet only a small fraction feel highly confident in their defenses.
That gap should be a wake-up call.
Fraudsters are evolving quickly, leveraging stolen data, impersonation tactics, and increasingly sophisticated digital schemes. At the same time, many community associations continue to rely on processes that were never designed to withstand today’s threat landscape.
Why Traditional Processes Are Failing
For many associations, accounts payable processes still depend heavily on manual workflows, email communication, and paper-based payments. These approaches create multiple points of vulnerability:
- Email dependence makes it easier for fraudsters to impersonate vendors or internal stakeholders
- Manual processes introduce human error and reduce visibility into suspicious activity
- Paper checks can be intercepted, altered, or forged
- Manual bank account updates open the door to unauthorized changes
These are the entry points that fraudsters exploit every day. And because these activities often appear routine, fraudulent transactions can go unnoticed until the financial damage is already done.
The Most Common Schemes Targeting Associations
Finance teams across community associations should be especially alert to three prevalent types of fraud:
- Business Email Compromise (BEC): Fraudsters pose as vendors or executives to request urgent payment changes
- Phishing Attacks: Emails designed to capture login credentials or sensitive financial data
- Invoice Fraud: Fake or altered invoices submitted for payment
These schemes are effective because they rely on trust and on the assumption that standard processes are being followed.
Finance Is the Front Line
For CAI members, this is where the role of finance becomes critical.
Fraud prevention isn’t just about controls. It’s about vigilance. Finance teams are often the first and last line of defense, responsible for identifying red flags before payments are released.
That requires more than process compliance. It requires awareness.
Simple inconsistencies can signal a larger issue:
- Bank account details that suddenly change
- Formatting errors or unusual language in communications
- Requests that bypass standard approval channels
- Subtle discrepancies in invoices or vendor information
Spotting these warning signs early can prevent significant financial loss.
Building a Stronger Defense
The good news is that community associations can significantly reduce their exposure to fraud by strengthening a few key areas.
1. Elevate Staff Training and Awareness
Fraud schemes evolve constantly, and training must keep pace. Regular education, combined with simulated fraud scenarios, helps staff recognize threats in real time.
Refresher training every six months ensures teams stay current as tactics change.
2. Strengthen Internal Controls
Well-designed controls create friction for fraudsters without slowing down operations. These include:
- Segregation of duties
- Multi-factor authentication (MFA)
- Positive pay for checks
- Real-time transaction monitoring
- Ongoing supplier validation
Controls should be reviewed and updated regularly to reflect emerging risks.
3. Reduce Reliance on High-Risk Payment Methods
Paper checks remain one of the most vulnerable payment types. When checks are necessary, they should be tightly controlled, securely stored, and closely monitored.
More secure payment methods, particularly those that provide tracking and encryption, can significantly reduce risk exposure.
4. Validate Vendors and Payment Changes Rigorously
One of the most common fraud tactics involves fraudulent bank account change requests.
Independent verification, using trusted contact information, not email instructions, is essential. Many organizations are also turning to third-party validation processes to ensure supplier information is accurate and continuously monitored.
5. Establish a Formal Fraud Response Plan
Even with strong prevention measures, incidents can occur. A clear response plan ensures your team knows exactly what to do:
- How to report suspicious activity
- Who is responsible for investigation
- Steps to contain and mitigate damage
- How to communicate internally and externally
Without a plan, response time slows and losses can escalate.
A Growing Threat Requires Immediate Action
Payment fraud is not slowing down. It’s accelerating and becoming more targeted, more sophisticated, and more difficult to detect.
For community association leaders, the question is whether your organization is prepared to detect and stop it in time.
The most effective defense isn’t a single control or policy. It’s a coordinated approach that combines awareness, strong processes, and continuous vigilance.
Fraud may be hiding in plain sight. But with the right focus and discipline, it doesn’t have to go unnoticed.
By: Sean Madigan, VP, Sales, Edenred Pay
Sean Madigan is the Vice President of Sales for Edenred Pay’s Property Management and Hospitality divisions. With 26 years of experience in property management, banking, and AP automation, Sean helps organizations digitize their invoice-to-pay processes, strengthen fraud mitigation efforts, and optimize back-office operations. A frequent speaker at industry events and webinars, he brings deep expertise in digital payments, including virtual cards and ACH.
Nate Falger