B2B Payments Fraud Still Raging in US, AFP Survey Shows

To manage payments fraud, organizations should adopt an effective mix of internal controls and fraud-management services

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Association for Financial Professionals

Apr 22, 2010, 01:14 ET

WASHINGTON, April 22 /PRNewswire/ -- B2B payments fraud is still a threat to U.S. organizations, but many are employing fraud control measures to keep it at bay, according to a survey by the Association for Financial Professionals (AFP).

The 2010 AFP Payments Fraud Survey, underwritten by J.P. Morgan, found that a majority of organizations experienced attempted or actual payments fraud in 2009. It also found that most now employ measures to combat these threats, using a combination of account-level solutions and services provided by their banks.

Criminal entrepreneurs commit most of the B2B Payments fraud attempts, with outside individuals accounting for over 85 percent of the fraud reported in the AFP survey.

Checks are by far the payment method of choice for fraudsters. A full 90% of organizations experiencing at least one fraud attempt in 2009 reported fraud by check, and a full 64 percent of fraud losses were linked to checks. In fact, the single best action organizations can take to reduce fraud is to reduce or eliminate their use of checks, according to AFP.

"I see payments fraud as a good news/bad news situation," said David Belligner, AFP's director of payments. "On the one hand, fraudsters continue to assault organizations with fraud attempts. On the other hand, organizations have continued to improve their defenses against fraud."

Corporate treasury professionals who responded to the AFP survey cited bank-provided control measures that include positive pay/reverse positive pay (83 percent), ACH debit blocks (77 percent), ACH debit filters (58 percent), and payee positive pay (52 percent). Two-thirds of companies also rely on internal processes such as daily reconciliation and account segregation, for example using separate accounts for ACH and check transactions. In addition, a handful (8%) of organizations use non-bank provided fraud control services.

"J.P. Morgan is committed to helping our clients understand the threats from fraud as well as the means to control it." said Iqbal M. Khan, executive director, J.P. Morgan Treasury Services. "We are pleased to sponsor the 2010 AFP Payments and Fraud Control Survey. We look forward to the data being used to foster important discussion around this issue and to ensure corporates understand and have access to the anti-fraud tools that they need."

Since 2005, AFP has examined the nature and frequency of fraudulent attacks on business-to-business payments as well as the tools that organizations use to control payments fraud. Continuing that research, in January 2010 AFP conducted its Payments and Fraud Control Survey to capture the payments experiences of organizations during 2009.

KEY FINDINGS

Seventy-three percent of organizations experienced attempted or actual payments fraud in 2009.
Eighty-one percent of organizations with annual revenues over $1 billion were victims of payments fraud in 2009 compared with 63 percent of organizations with annual revenues under $1 billion.
Thirty percent of survey respondents report that incidents of fraud increased in 2009 compared to 2008.
Nine out of ten organizations (90 percent) that experienced attempted or actual payments fraud in 2009 were victims of check fraud. The percentages of organizations affected by other types of payments fraud were:
ACH debit (25 percent)
Consumer credit/debit cards (20 percent)
Corporate/commercial cards (17 percent)
ACH credits (seven percent)
Wire transfers (three percent)
Seventy percent of organizations that were victims of actual and/or attempted payments fraud in 2009 experienced no financial loss from payments fraud.
Among organizations that did suffer a financial loss resulting from payments fraud in 2009, the typical loss was relatively small at $17,100

ABOUT THE SURVEY

In January 2010, AFP surveyed corporate practitioner members who held the job title of cash manager, analyst or director and received responses 416 responses. AFP received an additional 69 responses from non-member corporate practitioners holding similar job titles. The vast majority of respondents were from mid-market and large U.S. organizations with revenues of at least $250 million and spanning a wide range of industries. The survey was developed and implemented by the AFP Research Department.

Read the full report: www.afponline.org/research

AFP Payments Resources: http://www.afponline.org/pub/res/topics/topics_pay.html

ABOUT AFP® (www.afponline.org/about )

The Association for Financial Professionals (AFP) serves a network of more than 16,000 treasury and finance professionals. Headquartered outside Washington, DC, AFP provides members with news, economic research and data on the evolving world of treasury and finance, as well as treasury certification programs, networking events, financial analytical tools, training, and public policy representation to legislators and regulators. AFP is the daily resource for treasury and finance professionals.

AFP's global reach extends to over 150,000 treasury and financial professionals worldwide, including AFP of Canada; London-based gtnews, an on-line resource for the treasury and finance community; and bobsguide, a financial IT solutions network.

SOURCE Association for Financial Professionals