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Payments Fraud – The “New Normal”?

Written by Alicia Buttchen, Assistant Vice President - Treasury Management

Alicia Buttchen Candid PhotoThere’s no returning to the quaint era of the 1960s when Frank Abagnale, Jr., crossed the country committing check fraud left and right, as detailed in the movie “Catch Me If You Can.” With more than 20 billion connected devices, there are now perhaps just as many ways to cook up payments fraud schemes.

Although consumers are clearly targets, businesses are among the hardest hit by cybercrime. According to the 2018 Verizon Data Breach Investigations report, 58% of cyber attack victims were small businesses. No industry is immune — retail, health care, manufacturing, construction, and nonprofits all across the United States report losses to cybercriminals. Using all sorts of tactics, such as phishing emails, social engineering, email spoofing, and malware, fraudsters dupe unsuspecting and savvy computer users alike.

SURVEY SAYS

To spotlight trends for the banking industry and executives alike, the Association for Financial Professionals (AFP) publishes a Payments Fraud and Control Survey yearly. In 2018, the AFP reported a record-setting 82 percent of companies were targets of payments fraud, an increase of 4 percent from the prior year, and a 20-percent increase since 2014.

According to the AFP survey, check fraud and wire transfer fraud declined slightly from last year; however, they remain the primary target of payments fraud – check fraud (70 percent) and wire transfer fraud (45 percent). This decline was offset by an increase in ACH payments fraud as a new vehicle for scams. This year’s results uncovered a noticeable increase in ACH credits (20 percent) and ACH debits (33 percent) fraud. The noticeable increase in ACH payments fraud indicates that fraudsters are increasingly more sophisticated and target the process leading up to the payment initiation, indicating internal systems may have been compromised.

In Wisconsin, 81% of companies were targets of check fraud, 6% wire transfer fraud, followed by 13% ACH debit and credit fraud.

The survey also saw a dramatic increase in companies exposed to business email compromise (BEC) —80% over 64% the previous year.

PROTECT YOUR BUSINESS

Education and training programs are key to reducing your risk. The loss of monetary funds can be detrimental; however, reputational damage could have greater impact and affect your business in the long run. Now more than ever, companies need a plan of action to mitigate the risk of fraud. The Wisconsin Small Business Cybersecurity Initiative, a network of organizations providing cybersecurity education and resources, has complimentary educational resources and events on their website. The Association of Fraud Examiners (ACFE) and The Federal Communications Commission (FCC) offer training resources, which include videos, tutorials and fraud prevention checklists. Resources such as www.onguardonline.gov are available on First Business’s website as well.

While fraud may be becoming the “new normal” globally, your company doesn’t have to be a victim. Review your fraud health to determine where you have gaps and what you can do to improve your controls. Take a proactive stance on fraud and talk to your trusted treasury management professionals about the steps you should take to protect your company. First Business offers a helpful fraud protection checklist to get started.

6 Fraud Prevention Questions to Consider:

  • Does your company have up-to-date controls in place to prevent fraud?
  • Do your employees participate in ongoing fraud education to stay on top of the latest trends?
  • Does your company test its fraud health? How often?
  • Does your company have the appropriate financial institution-provided fraud protection solutions in place?
  • Does your company have a cybersecurity insurance policy in place to transfer the risk? When was the last time you reviewed your insurance coverage?
  • What’s your incident response plan? Is it up to date?

Through our emphasis on relationship-focused banking, we provide clients with the latest solutions and education to help reduce the risk of financial fraud. We leverage 30 years of experience with businesses in diverse industries to help proactively address your business’s specific financial needs, including the risk of fraud. Are you working with a financial provider that helps you stay on top of the latest fraud trends? If not, please reach out to us.

Questions on How to Avoid Financial Fraud?

Reach out to First Business to learn more about fraud prevention.

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