Payments Fraud

Payments Fraud Working Group Highlights of the 2009 AFP Payments Fraud & Control Survey

Nasreen Quibria Association for Financial Professionals May 19, 2009

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Agenda

Survey Methodology

Fraud Attempts & Losses by Payment Method

Risk Mitigation Tools

Questions

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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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Attempted or Actual Payments Fraud

55%

68% 72% 71% 71%

24%

6%

-1% 0%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

2004 2005 2006 2007 2008

Attempted or Actual Payments Fraud % Growth

Almost three-quarters of organizations experienced attempted or actual payments fraud.

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Fraud Attempts & Losses by Payment Method

Payment Method Subject to

Fraud Suffered Financial Loss from Fraud

Responsible for 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%

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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Check Fraud

• Types of Check Fraud

• Remote Deposit Capture

• “Holder in Due Course”

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Origins of Card Fraud

70% 11%

32% Unknown external party

Third-party or outsourcer

Employee

78% Outside Party

Internal Party

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Estimated Median Value of Payments Fraud

$26,600

$23,300

$13,900 $15,200

-12%

-40%

9%

-0.5

-0.4

-0.3

-0.2

-0.1

0

0.1

0.2

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

2004 2006 2007 2008

Estimated Median Value of Payments Fraud % Growth

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Risk Mitigation Tools P

aym

en

ts

All

Respondents

Revenues over $1 billion

Revenues under $1

billion

Ch

eck

s Positive pay/Reverse positive pay 82% 87% 79%

Payee positive pay 50 60 41

“Post no checks” restriction on depository accounts 34 42 29

AC

H

ACH debit blocks 71 79 60

ACH debit filters 55 62 49

ACH positive pay 19 19 18

Universal Payment Identification Code for ACH credits 5 7 3

Oth

er

Other 5 4 5

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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