Portals and Rails, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, is intended to foster dialogue on emerging risks in retail payment systems and enhance collaborative efforts to improve risk detection and mitigation. We encourage your active participation in Portals and Rails and look forward to collaborating with you.
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November 07, 2011
International Fraud Awareness Week is here
According to the Association of Certified Fraud Examiners (ACFE), organizations worldwide lose roughly 5 percent of annual revenues to fraud. That's huge. A theme that we return to again and again in Portals and Rails is the fact that technology is making our lives—including the ways we transact consumer payments—more efficient and secure. But these new technologies also offer fraudsters new and sometimes better ways to perpetrate crime.
In an effort to promote fraud awareness and education, starting November 7, the ACFE is sponsoring International Fraud Awareness Week, a "time dedicated to fraud awareness, detection, and prevention." So in keeping with this theme, we are using this space to refocus on some of the issues around payments fraud in the United States.
U.S. payments fraud is on the rise but hard to measure
Unlike other countries, the United States does not have a single, uniform repository for collecting fraud loss data. Industry analysts primarily base their concerns about the industry on anecdotes from law enforcement, financial intelligence agencies, and regulators. In addition, recent media accounts of check fraud, corporate account takeovers, payment card breaches, card payment terminal skimming, and the like leave no doubt that in the retail payments arena, leave no doubt that the problem of fraud is universal and growing.
Also validating the growing concern are proxies such as fraud surveys from organizations like the American Bankers Association (ABA), which measures deposit account fraud in banks, and the Association for Financial Professionals, which works with corporations to measure their fraud loss experience. However, more information may be needed as payment systems grow more complex, provide new alternative solutions and access new electronic channels.
Internal fraud is growing globally
The global economic downturn has led to an increased incidence of payments fraud. Sometimes financially distressed employees—rationalizing their behavior in light of dire circumstances—commit frauds within a business, effectively stealing from their employers. For example, employees in financial institutions who have access to large amounts of customer data may use their insider access to commit fraud. In one of our podcasts, an expert noted that internal fraud is more growing more common—and complex—as criminal rings increasingly place their people within legitimate organizations, where they can then steal data. Once they have the data, they can use it to commit a variety of frauds, including identity theft and payment crimes, such as card counterfeiting and counterfeit checks, to name just a few.
Fraud awareness week highlights old-school solutions
The International Fraud Week web page highlights resources for fraud prevention and education that businesses and consumers can tailor to their own particular needs. For example, the site offers a link to a Fraud Prevention Check-Up, which provides a framework for business to assess their risk and evaluate the strength of their fraud mitigation environment. Another anti-fraud resource is a presentation with tips to help organizations prevent and detect fraud.
To that same end, Portals and Rails in an earlier blog offered a recommendation for businesses to be proactive by adopting relatively simple control processes. For example, basic checklists like the one that follows can help organizations comply with ACH rules and regulations, avoid human error, and reduce fraud.
International Fraud Awareness Week activities
To help raise awareness around fraud, the ACFE recommends that businesses participate year round in its blog and in other social media initiatives, such as forums for dialoguing and sharing ideas on fraud detection and mitigation. It also suggests that organizations spread the word to colleagues and clients about International Fraud Awareness Week and the resources available to promote strong fraud risk management program development.
One thing we know for certain, and can't say enough, is that our payment systems are growing more and more complex, in terms both of sophisticated technologies and of multiple new nonbank service partners entering the mix. With this constant change and development, the payment distribution chain will undoubtedly contain more points of potential vulnerability to risk and fraud. Taking basic preventive measures and increasing industry awareness through the activities and resources highlighted during International Fraud Awareness Week can go a long way to combating payment-related risks and fraud.
By Cynthia Merritt, assistant director of the Retail Payments Risk Forum
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- account takeovers
- ATM fraud
- bank supervision
- banks and banking
- card networks
- check fraud
- consumer fraud
- consumer protection
- cross-border wires
- data security
- debit cards
- emerging payments
- financial services
- identity theft
- law enforcement
- mobile banking
- mobile money transfer
- mobile network operator (MNO)
- mobile payments
- money laundering
- money services business (MSB)
- online banking fraud
- payments risk
- payments study
- payments systems
- phone fraud
- remotely created checks
- risk management
- Section 1073
- social networks
- third-party service provider
- trusted service manager
- Unfair and Deceptive Acts and Practices (UDAP)
- wire transfer fraud
- workplace fraud