Double-check That Check

Payments fraud is on the rise, according to a new survey, and physical checks were the means of attack in at least one instance at 93 percent of th...
Stephen Taub and Dave CookMarch 19, 2007

Payments fraud, or attempted payments fraud, targeted 72 percent of organizations in 2006, compared with 68 percent in 2005, according to a new survey by the Association for Financial Professionals.

Physical checks were the means of attack in at least one instance at 93 percent of the organizations affected, the AFP also reported. Other payment methods targeted for fraud include automated clearing house (ACH) debit fraud, at 35 percent of the affected organizations; consumer credit card fraud, at 17 percent; and corporate card fraud, at 14 percent.

For its survey, the AFP gathered responses from 414 cash managers, analysts, assistant treasurers, directors, and controllers.

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The most common means of attempting check fraud, according to the survey, was altering a payee name on a check. The AFP noted that 86 percent of respondents said their organizations had adopted positive pay services prior to 2006, but only 30 percent were using payee positive pay. That latter service, the AFP explained, examines the payee name on a paid check to confirm that it matches the payee name on the issued check.

As for ACH fraud, the survey found that half of the organizations that were financially liable for such losses last did not use ACH debit blocks or filters; another 22 percent failed to reconcile their accounts or to return fraudulent ACH debits on a timely basis.

Smaller organizations were at even greater risk. According to the AFP, organizations with annual revenues below $1 billion were nearly three times as likely as larger organizations to suffer ACH fraud losses, and they are much less likely to employ debit blocks and filters.

Sadly but not surprisingly, the study found that in many cases, the fraud is perpetrated internally: Employees were responsible for about half of the cases involving corporate cards. Internal fraud appears to be an important factor in check and ACH fraud as well, the survey found.