By Alex Doehr, Treasury Management Strategy & Execution Director at Huntington National Bank
According to the 2021 Association for Financial Professional (AFP) Payments Fraud and Control Survey, 74% of surveyed businesses experienced attempted or actual payment fraud in 20201.
Companies of all sizes can be potential targets, especially during times of crisis. Criminals often take advantage of these moments to increase their efforts. The COVID-19 pandemic has presented that kind of opportunity, and business owners need to be aware of the risks and take action to manage, control, and mitigate those risks.
How it happens.
Payment fraud occurs through a variety of methods, from age-old schemes to new, technology-driven tactics. Here are the most common types reported in the AFP survey1:
- Business email compromise (BEC) is a sophisticated tactic that targets individuals who perform wire transfer payments. Criminals create what seems like a legitimate email account and request payments to a fraudulent account. In 2020, 76% of surveyed organizations experienced at least one instance of BEC.
- Check fraud remains one of the most prevalent forms of payment fraud. While paper check use has steadily declined as automated payments become more common, plenty of organizations still rely on them: As of 2019, 42% of surveyed organizations still use paper checks for B2B payments.
- Wire-transfer fraud has decreased in recent years, from 48% in 2017 to 39% in 2020. Although businesses are experiencing fewer instances of wire-transfer fraud, this type of fraud remains a continued threat especially as BEC activity increases.
- Automated Clearing House (ACH) transactions have historically been considered more secure than checks. However, as organizations shift away from using checks, fraudsters are targeting ACH payments at a higher rate. Organizations experienced slightly higher rates of ACH debit fraud in 2020 than in the previous year.
Why it matters.
Although incidents of attempted or actual fraud dropped slightly in 2020, almost three-quarters of companies were still impacted. Financial losses from payment fraud can cripple a business, but damage to the reputation of an organization should also be considered.
Businesses need to be aware that criminals are getting more savvy, and technology is getting more complex. Without taking steps to mitigate fraud, the chances of being compromised are higher.
What you can do.
The first step to managing and helping to mitigate payment fraud is to acknowledge that it’s a reality. Then, create a plan to help minimize your exposure that includes talking with your banking partner about solutions to help prevent or mitigate possible fraud situations. If fraud does occur on your accounts, here’s what to do:
- Contact Huntington as soon as possible.
- File a complaint with www.ic3.gov. It is vital you provide as much detail as possible. For additional information on helping to prevent B2B payment fraud, visit www.ic3.gov for public service announcements on payment fraud trends and cybersecurity best practices.