Survey: Payments Fraud Is Rampant

More than 70 Percent of Businesses Affected by Fraud in 2008 In the wake of the Heartland Payment Systems data breach, a new study shows that a majority of U.S. businesses, including financial institutions, are under continued attack via payments fraud.

Economic conditions and the growth of electronic payments have opened up new opportunities for payment fraud, according to the 2009 Payments and Fraud Control Survey by the Association for Financial Professionals (AFP). The assault on payments is widespread: more than 70 percent of businesses surveyed experienced attempted or actual payments fraud in 2008.

The survey shows large organizations are more likely to have experienced payments fraud than smaller ones. An estimated 80 percent of organizations with annual revenues over $1 billion were victims of payments fraud in 2008, compared with 63 percent of organizations with annual revenues under $1 billion.

Thirty percent of survey respondents report that incidents of fraud increased in 2008 compared to 2007. Almost 40 percent report increased fraud activity during the second half of 2008, as economic conditions worsened across the country.

"The fraud attacks on payment activities have occurred at a greater frequency than we've seen in the past," says Nasreen Quibria, Director of Payments for AFP says in a statement about the survey. " Now, the vulnerability of all payment methods especially checks demands a range of fraud-fighting tools and the vigilance of financial and treasury professionals responsible for protecting organizations' assets."

The survey had responses from 629 corporate treasury and finance professionals including assistant treasurers, controllers, cash managers, analysts, and directors. Since 2005, the AFP has studied the nature and frequency of fraudulent attacks on business-to-business payments and the industry fraud-risk tools that are used to control payments fraud.

More Results

Nine out of 10 organizations (91 percent) that experienced attempted or actual payments fraud in 2008 were victims of check fraud. The percentages of organizations affected by payments fraud via other payment method were:

ACH debit (28 percent);
Consumer credit/debit cards (18 percent);
Corporate/commercial cards (14 percent);
ACH credits (7 percent);
Wire transfers (6 percent).

About 63 percent of businesses that were victims of actual and/or attempted payments fraud in 2008 experienced no financial loss, and among organizations that did suffer a financial loss resulting from payments fraud in 2008, the typical loss was relatively small at $15,200.

The AFP says many businesses mitigate financial loss from fraud by turning to a number of defensive measures provided by their banks, including:

Positive pay/reverse positive pay (82 percent);
ACH debit blocks (71 percent);
ACH debit filters (55 percent);
Payee positive pay (50 percent);
"Post no checks" restriction on depository accounts (34 percent).

Businesses may also develop and/or modify internal business processes to minimize potential payments fraud risks. The AFP says processes considered important include:

Stopping the provision of payment instructions by phone or fax (86 percent);
Increasing the use of electronic payments for business-to-consumer and business-to-business transactions (82 percent);
Reducing the number of bank accounts (82 percent).

Download the complete AFP report here.


About the Author

Linda McGlasson

Linda McGlasson

Managing Editor

Linda McGlasson is a seasoned writer and editor with 20 years of experience in writing for corporations, business publications and newspapers. She has worked in the Financial Services industry for more than 12 years. Most recently Linda headed information security awareness and training and the Computer Incident Response Team for Securities Industry Automation Corporation (SIAC), a subsidiary of the NYSE Group (NYX). As part of her role she developed infosec policy, developed new awareness testing and led the company's incident response team. In the last two years she's been involved with the Financial Services Information Sharing Analysis Center (FS-ISAC), editing its quarterly member newsletter and identifying speakers for member meetings.




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