Cheques lead US payment fraud

If an incentive was ever needed to hasten the
migration from cheques to electronic forms of payment, US industry
body the Association of Financial Professionals (AFP) has provided
it.

Exposing the vulnerability of cheques the AFP’s
2008 Payments Fraud and Control Survey revealed that of 3,950
organisations surveyed 94 percent that had experienced attempted or
actual payment fraud in 2007 were victims of cheque fraud.

While cheque fraud and attempted cheque fraud
was more than disconcerting, electronic payments were also not
spared. Of electronic payment forms, automated clearing house (ACH)
debits (a transaction originated to debit another party) came under
the heaviest attack with 26 percent of organisations reporting
fraud attacks experiencing it in this area.

However, the AFP pointed out that of
organisations experiencing more fraud attempts in 2007 than in
2006, 90 percent reported more cheque fraud while only 16 percent
reported more ACH fraud.

In many instances of ACH, fraud organisations
had themselves to blame. According to the AFP, failure to adopt
effective internal procedures and bank fraud control services were
the most frequently cited reasons for a financial loss. For
example, 56 percent of organisations that suffered financial losses
from ACH fraud did not reconcile their accounts or return
fraudulent ACH debits on a timely basis. In addition, half of
organisations experienced financial losses because they did not use
ACH debit blocks or ACH debit filters, both of which restrict
debits to a demand deposit account.

Overall 30 percent of organisations reported an
increase in fraud attacks of all types in 2007 compared with 2006.
A further 52 percent said attack levels were about unchanged in
2007 and only 18 percent reported a decline. Of organisations
surveyed, 71 percent experienced actual or attempted fraud attacks
in 2007.