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Fraud on the Rise: How Corporates Can Fight Back (2009)

Fraud on the Rise: How Corporates Can Fight Back (2009)



2009 Association for Financial Professionals Webinar: ...

2009 Association for Financial Professionals Webinar:

Against the backdrop of deteriorating financial conditions, especially in the second half of 2008, a significant number of organizations were subject to payments fraud attempts. Hear the findings of the 2009 AFP Payments Fraud & Control Survey. Learn about real-life fraud attempts, the counter-measures that corporate practitioners are taking, and the diligence that must still be utilized to guard against check, ACH and card payments fraud.



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    Fraud on the Rise: How Corporates Can Fight Back (2009) Fraud on the Rise: How Corporates Can Fight Back (2009) Presentation Transcript

    • on the Rise: How Corporates Can Fight BackHighlights of the 2009 AFP Payments Fraud & Control SurveyDon Hollingsworth, Ameren CorporationNasreen Quibria, Association for Financial ProfessionalsMay 28, 2009
    • AgendaIntroductionSurvey MethodologyFraud Attempts & Losses by Payment MethodRisk Mitigation ToolsFinal Thoughts
    • Introduction• The Association for Financial Professionals (AFP) serves a network of more than 16,000 treasury and finance professionals. Headquartered in Bethesda, MD, AFP provides members with breaking news, economic research and data on the evolving world of treasury and finance, as well as world-class treasury certification programs, networking events, financial analytical tools, training, and public policy representation to legislators and regulators.• In Payments … AFP seeks to promote greater awareness of actions that payments system participants can take to guard against the fraud that can undermine their organization’s security and financial controls as well the safety and soundness of the U.S. payments system.
    • IntroductionAmeren Corporation (NYSE: AEE)• Based in St. Louis, among largest investor-owned electric & gas utilities in U.S.• Serves 2.4 million electric & one million natural gas customers across 64,000 square mile area of Missouri• Owns more than 16,000 megawatts of generating capacity• Operates non rate-regulated generation, development, marketing & fuel service companies
    • 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
    • Attempted or Actual Payments Fraud 80% 72% 71% 71% 68% 70% 60% 55% 50% 40% 30% 24% 20% 10% 6% 0% -1% 0% 2004 2005 2006 2007 2008 -10% Attempted or Actual Payments Fraud % GrowthAlmost three-quarters of organizations experienced attempted or actual payments fraud.
    • Fraud Attempts & Losses by Payment Method Subject to Suffered Financial Responsible for Payment Method Fraud Loss from Fraud Greatest Financial 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%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 afinancial loss; only 17% or one out of six organizations suffered a financial loss from accepting corporate/commercial cards
    • Corporate Experience• Credentials used to redirect vendor checks• “Secret Shopper”• “Phishing and “Whaling”
    • 72%Check Fraud 59% 27%• Types of Check Fraud Counterfeit Payee name Loss, theft or checks (other alteration on counterfeit of than payroll) checks issued employee pay with the checks organization’s MICR line data• 44% of organizations use Remote Deposit Capture; 1% of those organizations were subject to fraud from the service• Twenty-two percent of organizations have been contacted by a third party claiming to be a “holder in due course”
    • Origins of Card Fraud Unknown external partyInternal Party Third-party or outsourcer 32% Employee 70% 11% 78% Outside Party
    • Cost of Cards Organization Suffering Loss PercentageMy organization 44Merchant 42Card issuing bank 33Card processor 14No organization suffered financial loss 11Other 14
    • Reason for Financial Liability fromAccepting Cards 83% 90% 80% 70% 50% 60% 50% 33% 33% 40% 30% 20% 10% 0% Card-not-present Did not authenticate Delayed chargeback Other merchant assumes cardholder (e.g., response liability cardholder’s address)
    • Estimated Median Value of Payments Fraud $30,000 0.2 $26,600 $25,000 $23,300 9% 0.1 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 The median financial loss from payments fraud in 2008 was $15,200.
    • Risk Mitigation ToolsPayments 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%
    • Internal Processes Best Practices• 86% stopped providing payment instructions by phone or fax (percent)• 82% increased use of electronic payments for business-to- consumer and business-to-business transactions• 82% reduced the number of bank accounts• Organizations also use of separate accounts for different payment methods as a fraud control technique: – 75% of organizations maintain separate accounts for different payment methods and types. – 71% have separate accounts for disbursement and collections – 60% of organizations have separate bank accounts for checks and ACH payments.
    • Final ThoughtsFraud will always be around, but corporates canmitigate risk via: • Use of financial institutions anti- fraud services • Implementation of tight internal controls • Constant vigilance
    • Thank you…Don Hollingsworth, CTP Nasreen QuibriaAssistant Treasurer Director, PaymentsAmeren Corporation Association for Financial ProfessionalsP: 314.554.2838 P: 301.961.8676E: dhollingsworth@ameren.com E: nquibria@afponline.org