The Association of Financial Professionals new Payments Fraud Survey finds that corporate payments fraud is on the rise. Seventy-two percent of corporations experienced fraud (or attempted fraud) in 2006, up from 68% in 2005. Thirty-nine percent of organizations reported an increase in fraud incidents since 2005, 47% reported that the prevalence of fraud remained about the same, and 14% reported a decrease in fraud incidents. However, most organizations suffered little or no financial loss as a result of fraud.
Checks continue to be the primary source of fraud – although it's hard to say if this is because checks are still the primary form of B2B payment or because electronic payments are inherently more secure.
Many safeguards are in place to prevent fraud, thus most companies did not experience losses. Forty-two percent suffered no losses at all. Another 31% of companies experiencing at least one payments fraud incident suffered losses under $25,000. Only 5% of organizations sustained at least $250,000 in losses from fraudulent activities.
Most fraud is perpetuated in-house (just as identity theft is often perpetuated by someone you know):
In many cases, the fraud is perpetrated internally. Employees were
responsible in about half of the cases involving fraud associated with
the use of organizations' corporate cards (e.g., travel &
entertainment, purchasing, fleet cards). Internal fraud appears to be
an important factor in check and ACH fraud as well, and one of the
reasons why organizations must assume liability for financial losses
from the fraud.
The AFP survey results are based on responses from 414 cash managers, analysts,
assistant treasurers, directors, and controllers.