Payments Fraud Still Major Challenge for Banks

Payments fraud hit a record high in 2017, with 78% of all organizations affected, according to a report from the Association of Financial Professionals and J.P. Morgan. Wire fraud was the second-most prevalent in that category (check fraud was No. 1).  Wire fraud losses are averaging about $63,000 per incident and can run as high as $1 million dollars, according to the security blog frankonfraud.com.

“It’s really becoming a huge issue for banks across many of their channels,” said Thomas Cronkright, president/CEO of the fintech firm CertifID.  “In direct channels, when they are providing loans for collateral-based lending, the challenge is they are funding to a third party. So how do you trust that the wiring information has been received from the third party is accurate?”

Cronkright said over the past 18 months this has become a particular issue in real estate transactions.  “They’re preying on the weakest link [in the transaction],” he added. “Attacks in real estate have really been ramping up.”

The FBI last month issued a public service announcement that the real estate sector has been “heavily targeted” recently by business email compromise scams.  “The scam continues to grow and evolve, targeting small, medium and large business and personal transactions,” the announcement said. ”Between December 2016 and May 2018, there was a 136% increase in identified global exposed losses.”

Though banks themselves are typically not targeted, Cronkright said there needs to be an increase “in the education level of the entire transaction ecosystem, from consumer to seller.” He adds that banks are suffering direct losses from this, so “we all need to raise our standards on how we are authenticating and confirming digital identity.”

This is a byproduct of fraud increasingly moving to digital spaces, leading to an ongoing “cat-and-mouse game” between banks or other legitimate businesses and fraudsters, said Rick Trainor, the CEO of business services for LexisNexis Risk Solutions.  “They continue to try and beat the system. More and more, transactions are moving to mobile and online spaces, so there’s more popping up there.”

Source:  American Banker