Corporate Payments Fraud Declines From Peak, AFP Survey Shows

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Association for Financial Professionals

Mar 20, 2012, 08:00 ET

Criminals see large companies as easy targets, quick hits

WASHINGTON, March 20, 2012 /PRNewswire/ -- Large companies and their corporate payments systems remain the prime targets for fraudsters, according to the 2012 AFP Payments Fraud and Control survey released today by the Association for Financial Professionals (AFP).

Now in its eighth year, the 2012 AFP Payments Fraud and Control Survey, sponsored by J.P. Morgan, found that two-thirds of companies were hit by attempted or actual payments fraud during 2011, but few incurred financial loss because they took measures to mitigate exposures.

"Although attempted attacks still occurred in 2011, financial loss was avoided because companies have taken steps to eliminate vulnerabilities," said Jim Kaitz, AFP's president and CEO. "The Payments Fraud and Control survey reveals that checks remain highly vulnerable to fraudulent activity, which has spurred many companies to switch to less vulnerable electronic payments. Now fraudsters have shifted their focus to higher-value payoffs by hacking into corporate accounts."

Fraudsters aim for convenient targets of opportunity, especially big companies that handle many checks. The 2012 survey revealed that larger organizations were targeted more frequently than smaller ones (81 percent versus 55 percent) and with a 22 percent higher average loss. Industries with greater consumer access such as retail and insurance have fraud attack rates 15 to 20 percent higher than other industries.

More than 80 percent of companies surveyed employ best practices such as positive pay and daily reconciliations to mitigate fraud. When they do experience losses, it is often because they failed to comply with their own fraud policies.

"With the proliferation of payment options, fraudsters are constantly exploring newer and bolder ways to perpetrate fraud, making it necessary for treasury professionals to remain ever vigilant against these emerging schemes," said Stephen Markwell, executive director, J.P. Morgan Treasury Services. "Sophisticated new fraud protection technologies are making it possible to combat fraud more effectively and efficiently, reducing the potential for losses and protecting critical assets. J.P. Morgan is pleased to once again sponsor this year's Fraud Survey and looks forward to the dialogue and best practices the findings will generate."

The survey revealed a noteworthy vulnerability: payouts to check cashers (bank and non-bank) from holder in due course situations. Most organizations have aggressively pushed to achieve 100 percent electronic payroll to avoid this problem.

Additional key findings by payment type:

CHECKS - Checks remain the payment type most vulnerable to fraud attacks with 62 percent incurring incidence of fraud and 26 percent of respondents indicating they have been hit by frequent check fraud attacks. Attacks typically spread out over the course of the year, but many (38 percent) cluster together.
ELECTRONIC CHECK CONVERSION - Electronic check conversion services continue to experience a very low incidence of fraud (two percent), making this service a good choice in helping minimize instances of check fraud.
ACH – Only 14 percent of organizations experience frequent attacks via ACH. As the least likely target of fraud, ACH remains one of the most favored payment mechanisms from a fraud control perspective.
CARDS – The incidence of business card fraud continues to be relatively low, particularly on payroll and other benefit-related cards issued by companies to employees. Organizations need to maintain strict control over how, when and where their cards may be used.

For more information or to download the survey results, go to www.afponline.org/fraud

ABOUT THE SURVEY
In January 2012, AFP surveyed over 5,000 corporate practitioner members with the job title cash manager, analyst, and director, resulting in 399 responses, an adjusted response rate of nine percent. In addition, AFP surveyed non-member corporate practitioners holding similar job titles, generating an additional 48 responses. This is the eighth year that AFP has conducted this survey.

ABOUT AFP®
The Association for Financial Professionals (www.afponline.org ) is the daily resource for the finance profession. Headquartered outside Washington, DC, AFP serves a network of more than 16,000 members with news, economic research and data, treasury certification programs, networking events, financial analytical tools, training, and public policy representation to legislators and regulators. 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.

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SOURCE Association for Financial Professionals