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PaymentsJournal: Checks Are the Top Vehicle for Commercial Payments Fraud

  • There are many types of commercial payments fraud hitting organizations
  • Checks are leading the pack
  • Check fraud incidents have declined by 8% since 2019

The new episode of Truth In Data from PaymentsJournal features information on the types of commercial payments fraud that are afflicting organizations -- and they find that, while declining, checks are the leading tool used for fraud.

According to Data provided by Mercator Advisory Group’s Report entitled The Cost of Fraud: B2B Payments Experience 10% Increase During the Pandemic, of the organizations surveyed:

  • 66% experienced actual or attempted check fraud – but incidents have declined by 8% since 2019.
  • 39% experienced actual or attempted wire transfer fraud.
  • 34% have experienced actual or attempted ACH debit fraud.
  • 39% have experienced actual or attempted wire transfer fraud.
  • 24% have experienced actual or attempted corporate/commercial credit card fraud.
  • 19% have experienced actual or attempted ACH credit fraud.
  • 6% have experienced extortion due to ransomware.

Consolidating Multiple Sources

In a recent article, we took a look at the data from IDology's eighth annual fraud report, entitled The Beginning of a New Chapter: COVID, the Rush to Digitization, and the Impact on Fraud. The data from the report offered similar findings regarding the increase in fraud during the pandemic:

Fraud attempts spiked significantly in 2020. 69% of companies reported an increase in year over year fraud attempts, which is an increase of 53% compared to the prior year. Only 14% reported a decrease in fraud attempts, while 18% reported that it stayed the same.

Fraudsters came out in force during the pandemic to exploit opportunities from CARES to phishing, pandemic-related fraud, PPP, mass WFH deployments, decentralized fraud teams, nation-state attacks, civic discourse, fear and confusion. The pandemic was a historical fraud event, and the data shows criminals showed up.

Additionally, Mercator Advisory Group's report also confirms a statement made during a recent interview with Ingo Money CEO Drew Edwards, wherein Mr. Edwards notes that checks are “Money Mobility Instruments” and Fraud Targets:

Meeting the Fraud Challenge with Technology

As fraudsters' techniques evolve, so too should financial institutions.

“As fraudsters continue to adapt to ever-changing payment trends, organizations must be ready to defend their bottom lines,” noted Ben Danner, Analyst, at Mercator Advisory Group, and the author of the research report. “Organizations can perform several technological and non-technological interventions to combat this rising problem.”

With check transactions receiving an +8% increase (2022 NICE Actimize Fraud Insights Report), it's imperative that financial institutions deploy the right technologies to increase their fraud detection capabilities. This means not simply relying on standard applications like positive pay systems, but also deploying an AI-powered transactional-analysis system and image-forensics AI to examine transactional behaviors for anomalous activities and interrogate the scanned images of checks for counterfeit, forged, and altered checks.

Adopting a hybrid strategy that combines multiple systems will enable banks to offer the most effective methods of check fraud detection, ensuring their customers' funds will remain safe from the sticky fingers of fraudsters.

Fraud Prevention Cropped-OrbNet Forensic AI-01

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