Does the idea of losing money to fraudsters have you spooked? Even if you have never experienced payment fraud at your organization, you need to be vigilant. Money scams are becoming more and more sophisticated, and businesses need to stay up-to-date on the latest fraud methods to protect themselves. Here are five facts about payment fraud that underscore the need to defend yourself.
What is business payment fraud?
Business Payment Fraud (BPOF) occurs when someone uses an account belonging to another person or company without permission. It happens when someone takes out a loan, buys merchandise, or makes other payments on behalf of someone else. The victim may not even know they were scammed until after the fact. The most common business payment frauds are phishing, identity theft and money laundering.
Why is business payment fraud on the rise?
Payment fraud happens when someone uses stolen credentials to access an account and transfer funds out of it. It's usually done via email phishing scams, where scammers send emails pretending to be from a legitimate company asking users to enter their personal details (such as username/password) into fake websites. Once they've got those details, the scammer has full control over the victim's bank account.
How can a business avoid payment fraud?
Payment fraud occurs when someone attempts to use another person's account without their permission. It may be an attempt to steal funds or commit other crimes such as identity theft. The best way to prevent payment fraud is to ensure that all transactions are authorized by the customer. For example, businesses should never allow customers to purchase items without first verifying their identities. They should also verify the authenticity of orders before processing them.
Payments fraud is on the rise
If you are thinking that payment fraud is declining, you are wrong. The percent of organizations that experienced actual or attempted payments fraud increased from 60% in 2013 to 74% in 2016. This is the highest level of payments fraud on record, according to the [2017 AFP Payments Fraud and Control Survey]. In just three years payments fraud has increased drastically, which means that you need to educate yourself, your team, and your payees on how to protect your organization.
Checks are top payment method targeted by fraudsters
A check may seem safe and familiar in today’s technologically advanced world, where you are constantly hearing news stories about security breaches and hacking. Don’t be fooled – checks are actually the payment method most frequently targeted for fraud. There are a few reasons for this; checks continue to be the most used payment method for businesses, which makes them the top target for fraud. Whether fraudsters are using counterfeited checks, altering the checks, or creating fake identities to cash legitimate checks, it is clear that checks may be familiar, but they are not safe.
Business email payment scams are on the rise
You may know better than to respond to the Nigerian Prince email scam, but what about scams from legitimate email addresses? Compromised business email scams are increasing, and more and more businesses are the victims. Fraudsters gain access to a legitimate email account, usually from a senior member of an organization, and request payment to a specific account. Of course, this account belongs to the fraudster, and the fraudster is able to make off with hundreds of thousands of dollars in some cases. Combat this type of scam by making your payment methods clear to all of the relevant parties at your organization. If you need two approvers to make a payment or transfer, for instance, stick to this rule in all cases.
The majority of payment fraud is done by outside individuals
If you are wondering where the fraudsters are coming from, it is most likely from outside of your organization. In fact, 63% of actual or attempted payments fraud was committed by an outside individual. 52% of payments fraud originated from Business Email Compromise. Comparatively, only 5% of attempted or actual fraud originated from an internal party.
Wire transfers are the second most targeted payment fraud type
In 2016, 46% of corporations that experienced actual or attempted fraud reported that these attacks were via wire transfers. This type of fraud is up from 2013, where wire transfer fraud accounted for 14%. Often, business email compromise targets wire transfers, and this could account for the increase in wire transfer fraud. Whatever the reason, be extremely cautious when sending wire transfers, and consider using safer methods, like EFT payments.
Do these stats have you scared? Fraudsters are continually looking for new ways to scam businesses out of their money, but online security makes it harder for them. Find out how online payments can alleviate your risk in our Everything You Need to Know About Online Payments Guide.