Weekly Business Insights 09/06/2024

Payments Fraud and Control Report

Payments fraud activity had been increasing steadily since 2013 and in 2018 reached a new peak. More than 80 percent of financial professionals reported that their organizations were targeted by fraudsters in 2018—the largest percentage since the Association of Financial Professionals® (AFP) began tracking such activity. In the subsequent year, the percentage of organizations reporting incidents of payments fraud continued to be escalated at 81 percent; since then, fraud activity has declined. While that is an encouraging sign, recent survey results reveal that over 70 percent of companies continue to be targeted by fraudsters. Larger companies are more susceptible to fraud via ACH debits than are other organizations and are collaborating with internal partners to identify and return ACH debits in a timely manner within the return window to help in preventing fraud. The incidence of payments fraud via wire transfers decreased from 39 percent in 2020 to 32 percent 2021.

The percentage of organizations that were victims of fraud via wire transfer has been on a steady decline—48 percent in 2017, 45 percent in 2018, 40 percent in 2019, 39 percent in 2020 and 32 percent in 2021. Companies have become better at identifying wire fraud via business email compromise (BEC) scams; the steady decline in such fraud is proof that companies’ efforts to combat wire fraud are working.

Payments Fraud and Control Report (jpmorgan.com)

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Accounts Payable Fraud: Where to Spot It, and How to Prevent It

AP fraud has come a long way. Gone are the days of pretending to buy toner for the printers. Now with increasingly sophisticated scams, and ever larger business operations, the right tools are needed to detect and protect against AP fraud. Accounts payable automation is a key tool in the fight. Aside from its safety benefits, accounts payable automation can cut costs significantly: According to Institute of Finance and Management data, manually processing an invoice costs about $13, while the per-invoice cost of best-in-class automated processing is about $2.

The comprehensive solution to prevent AP fraud is the digitization of the AP process. By going digital, human error can be taken out of the picture, with the process of detecting some kinds of fraud becoming an automated process. All of the traditional checks and balances are important. They continue to hold value and should be retained. But digitization is the only way to truly ensure the integrity of the AP process.

As well as ensuring greater financial security, Accounts payable automation can improve in house communication, increase efficiency and save a business a sizable sum. An additional benefit comes in robust approval channels made available through a digital AP platform. Those allow for communication through reviewing and approving invoices before they are paid.

Accounts Payable Fraud: Where to Spot It, and How to Prevent It (bloombergtax.com)

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How to Detect and Prevent Accounts Payable Fraud

Check fraud involves the manipulation or theft of physical checks to illegally divert funds. Fraudsters often steal checks from outgoing mail, catching them before they reach their intended recipient. Once obtained, they may alter the check by changing the payee’s name or the amount. In some cases, fraudsters can use “mules” – individuals recruited to cash checks and forward the money, keeping a small percentage for themselves. ACH fraud typically involves cybercriminals gaining unauthorized access to a company’s bank accounts via phishing, malware, or social engineering tactics. Once they have access, they initiate unauthorized electronic transfers to accounts they control, which could be under fake identities or third-party accounts they have compromised.

To conceal their identity, fraudsters may use a network of mule accounts or even cryptocurrencies, which are harder to trace. ACH fraud is particularly insidious because it can occur without any physical interaction, making it difficult to detect until significant damage has already been done.

In BEC schemes, fraudsters impersonate a trusted figure, such as a vendor or senior executive, through compromised email accounts. They then send urgent requests to the AP department, instructing them to make payments to fraudulent accounts.

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If there is good news in the story, it’s that the demand for blood has steadily decreased over the past decade. From 2000 to 2020, the transfusion rate per capita in the United States has decreased by 2 percent per yearThatdecline follows revisions to transfusion guidelines from professional medical societies to reduce the overall number of blood units used in various procedures.

How to Detect and Prevent Accounts Payable Fraud (klippa.com)