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US payments fraud at record high, AFP survey shows

Payments fraud is continuing to grow in North America, with a record 82% of US organisations reporting incidents in 2018, according to a survey just issued by the Association for Financial Professionals (AFP).

The AFP’s 2019 Payments Fraud & Control Survey, underwritten by JP Morgan, found that America’s larger organisations were particularly vulnerable to payments fraud last year.

Businesses with revenue greater than $1 billion reported a jump of seven percentage points year-over-year to 87%. However, organisations with revenue less than $1 billion experienced fewer fraud attempts in 2018, down four percentage points to 69% from 73%.

Phishing on the rise

Business e-mail compromise (BEC) also set a record. Eighty percent of US companies reported BEC fraud last year, up from 77% in 2017. More than half (54%) of organisations reported financial losses as a result of BEC, the first time since AFP began tracking this data that the number climbed above the 50% mark.

More than three in four companies are responding by adopting stronger internal controls that prohibit payment initiation based on e-mails or other, less secure messaging systems.

“Payments fraud is a persistent problem that is only getting worse despite repeated warnings and educational outreach,” said AFP president and CEO, Jim Kaitz. “Treasury and finance professionals need to learn the latest scams and educate themselves—and perhaps more importantly—their work colleagues on how to prevent them.”

“It is equally important for businesses to mitigate against non-financial implications of payments fraud,” said Jessica Lupovici, managing director, JP Morgan. “Businesses stand to suffer reputational risk, which can be severe, expensive and require significant clean-up efforts.”

Other highlights of the 2019 survey include:

  • Seventy percent of organisations report being exposed to cheque fraud, a slight decrease from 2017. Cheques continue to be most impacted by fraud; however cheque fraud continued to decline to its lowest level since AFP began tracking such activity.
  • .Forty-three percent of organisations experienced direct financial loss as a result of payments fraud.
  • There is a noticeable increase in fraud activity via automated clearing house (ACH) debits and credits
    -Thirty-three percent of organisations reported ACH debit fraud in 2018—up from 28% the previous year
    -Twenty percent of organisations reported ACH credit fraud—up from 13% the previous year.

This item appears in the following sections:
Payments - Making
Financial Risk Management
North America

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