A Primer on Payment Fraud in 2013

Companies can be held liable for payment fraud. Mitigating the risk requires adoption of best practices, both in managing paper checks and in confronting digital threats.

Payment fraud is one of the biggest risk management challenges facing corporate treasury managers, and it’s one that businesses must battle on two fronts. Although media attention tends to focus on the emergence of technically sophisticated online banking scams, criminals continue to target paper checks for fraud. Both crimes should be front and center on a treasurer’s radar.

According to the “2013 AFP Payments Fraud and Control Survey” conducted by the Association for Financial Professionals (AFP), 61 percent of organizations experienced attempted or actual payment fraud in 2012. Checks continued to be the dominant payment form targeted by fraudsters, with 87 percent of affected organizations reporting check fraud attempts. Check fraud has been around for a long time, but in recent years criminals have become more proficient at it. The advent of inexpensive desktop publishing equipment has enabled them to create incredibly authentic-looking counterfeit checks. In its most common form, counterfeiting involves creation of fraudulent checks using an organization’s MICR-line data. Criminals also commonly alter the amount or payee name on checks that have actually been issued, or they steal or counterfeit employee paychecks.

 

Bank Services That Combat Check Fraud

Online Banking: New Opportunities for Fraud

In recent years, a new type of ACH fraud has emerged as criminals have taken advantage of companies’ adoption of online banking. In fact, new online banking scams are introduced almost daily.

Cards Are Targets, Too

Twenty-nine percent of the respondents to the AFP’s 2013 survey who were affected by payment fraud reported that commercial cards were targeted. In fact, of those respondents reporting that they experienced attempted or actual fraud related to business-to-business card transactions, 48 percent said it resulted from the improper use of their own commercial cards.

Keys to Curbing Payment Fraud

Fraudsters are targeting both paper and electronic payment methods, but checks remain organizations’ most vulnerable means of payment. In fact, according to the AFP, replacing all checks with electronic funds transfers is the single best way to combat fraud.

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