Presentation to the Federal Reserve Board - Payments Fraud Working Group

1. Payments Fraud
Payments Fraud Working Group
Highlights of the 2009 AFP Payments Fraud & Control Survey
Nasreen Quibria
Association for Financial Professionals
May 19, 2009

2. Agenda
Survey Methodology
Fraud Attempts & Losses by Payment Method
Risk Mitigation Tools
Questions
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3. Survey Methodology
• Annual survey conducted since 2005
• Online survey
• 629 companies with annual
revenues ranging from below
$50 million and above $20
billion were surveyed in January
of 2009
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4. Attempted or Actual Payments Fraud
80%
72% 71% 71%
70% 68%
60% 55%
50%
40%
30% 24%
20%
10% 6%
0%
-1%
0%
2004 2005 2006 2007 2008
-10%
Attempted or Actual Payments Fraud % Growth
Almost three-quarters of organizations experienced attempted or actual payments fraud.
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5. Fraud Attempts & Losses by Payment
Method
Responsible for
Payment Method Subject to Suffered Financial Greatest Financial
Fraud Loss from Fraud Loss
Check 91% 47% 60%
ACH 17%
ACH Credits 7% N/A 3%
ACH Debits 28% N/A 5%
Corporate/Commercial Cards 14% 44%/17%* 10%
Consumer Cards (Debit/Credit) 18% N/A 20%
Wire 6% N/A 1%
NOTES:
• N/A - Data was not collected in the survey
• *Of organizations subject to fraud, in using own corporate/commercial cards to make payments 44% of organizations suffered a financial loss; only 17% or
one out of six organizations suffered a financial loss from accepting corporate/commercial cards
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6. Check Fraud
• Types of Check Fraud
• Remote Deposit Capture
• “Holder in Due Course”
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7. Origins of Card Fraud
Internal Party
32% Unknown external party
Third-party or outsourcer
70%
11% Employee
78%
Outside Party
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8. Estimated Median Value of Payments
Fraud
$30,000 0.2
$26,600
$25,000 9% 0.1
$23,300
0
$20,000
$15,200 -0.1
$15,000 $13,900
-12%
-0.2
$10,000
-0.3
$5,000 -0.4
-40%
$0 -0.5
2004 2006 2007 2008
Estimated Median Value of Payments Fraud % Growth
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9. Payments
Risk Mitigation Tools
Revenues Revenues
All over $1 under $1
Respondents billion billion
Positive pay/Reverse positive pay 82% 87% 79%
Checks
Payee positive pay 50 60 41
“Post no checks” restriction on depository accounts 34 42 29
ACH debit blocks 71 79 60
ACH debit filters 55 62 49
ACH
ACH positive pay 19 19 18
Universal Payment Identification Code for ACH credits 5 7 3
Other
Other 5 4 5
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10. Thank you…
Nasreen Quibria
Director, Payments
Association for Financial Professionals
Phone: 301.961.8676
Email: nquibria@afponline.org
http://www.afponline.org/pub/pdf/2009_Payments_Fraud_Survey.pdf
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