Anyone who follows the payments industry will be aware of the increased fraud risks across multiple industry vectors. Data breaches are one of the major threats, since they can lead to follow-on fraud in payments and other areas. Members of our commercial, credit and other services will have the benefit of ongoing coverage to improve their knowledge of the these threats and tactical approaches. The article we reference from Payments Source mentions ‘reverse-fraud’ in the title, which sounds intriguing. However, upon further reading one realizes that the author is referring to payables fraud, which can be executed in any number of ways.
‘Fraudulent attacks on accounts payable departments had been on the rise to begin with, but a new sense of urgency has taken hold in the wake of a recent incident that cost Facebook and Google $100 million….Crooks find it easy and lucrative to create fake websites and invoices or take over legitimate accounts to trick companies into thinking they owe money to a false “supplier.” ‘
Payments fraud is often associated with banks and more often than not, specifically with regard to card-based cases. Banks don’t publish these results since fraud losses are counted as part of operating expense (along with the actual costs for managing fraud). We typically estimate these types of losses to be in the single-digit basis points range as a percentage of spend. The other part of these types of fraud write-offs are taken by the merchant via chargeback rules. But of course, there are many different types of payments fraud. So the reverse part is in contrast to this card-based inbound e-commerce fraud, meaning that fraudsters find ways to execute false outbound payments to their illegitimate accounts at the expense of companies who think they are paying suppliers.
The article goes on to point out recent schemes that took advantage of Facebook and Google who recently made substantial payments to spoofed or false accounts set up as advertising affiliates. Business e-mail compromise (BEC) is also mentioned, which we have explained in detail through our commercial & enterprise service coverage as well. Just another gentle reminder of the increasingly sophisticated methods being utilized by individuals, small groups, criminal organizations and state-based efforts to gain illicit financial rewards. Combating these schemes is an ongoing expense, and is not going to get easier, therefore investments must be made to keep a step ahead of the bad guys.
‘The San Mateo, Calif.-based Tipalti is using the trend to sell businesses on the idea of an internal financial crimes unit. “It basically means having access to and a full understanding of what is happening within your network,” Vrishaketu said…Businesses also have to be aware of not making payments to companies or individuals under government sanctions, and they have to have a sound anti money laundering program in place, he added…”The industry is big and unique, so there are lots of opportunities for fraud,” Vrishaketu said. “Making sure companies are aware of that is critical.” ‘
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group