1. 2019 AFP Payments Fraud & Control Survey
Northern Ohio
Association for Financial Professionals
September 16th, 2019
Magnus Carlsson
Manager, Treasury & Payments
AFP
© 2019 Association For Financial Professionals, Material is not to be used without consent

2. About the Survey
The survey was sent to Corporate Practitioner AFP Members
Data Collected in January 2019
Total 617 (682 in 2018) Responses
Sponsored by J.P. Morgan
© 2019 Association For Financial Professionals, Material is not to be used without consent

3. (Percent of Organizations)
Percent of Organizations Subject to Attempted and/or Actual Payments Fraud in 2018
(Percent of Organizations)
2018 Sees Another Record High Payments Fraud Level – When Will It Stop?
Payments Fraud is Now at a Record High at 82%, Well Above Previous Levels
Puzzle Piece 1:
New Record Level of Payments Fraud
Source: AFP Payments Fraud and Control Survey, Association for Financial Professionals
© 2019 Association For Financial Professionals, Material is not to be used without consent

4. (Percent of Organizations)
Percent of Organizations Subject to Attempted and/or Actual Payments Fraud in 2018
(Percent of Organizations)
Trend Shifting!
Overall Fraud is at Record Level!
Fraud on Larger Organizations Increase While Fraud on
Smaller Organizations Decrease
The Gap Between Small and Large Organizations is Widening
What’s Behind the Shift?
A New Type of Fraud?
2018
2017
Puzzle Piece 2:
Larger Organizations See Increased Fraud, Smaller Decreased
Source: AFP Payments Fraud and Control Survey, Association for Financial Professionals
© 2019 Association For Financial Professionals, Material is not to be used without consent

5. (Percent of Organizations)
Actual Direct Financial Loss from Attempted and/or Actual Payments Fraud in 2018
(Percent of Organizations)
Overall 43% of Respondents have Actual Losses From Payments Fraud
Most of the Losses are Under $25K
Source: AFP Payments Fraud and Control Survey, Association for Financial Professionals
© 2019 Association For Financial Professionals, Material is not to be used without consent

6. Change in Prevalence of Payments Fraud
(Percentage Distribution of Organizations Subject to Attempted or Actual Fraud )
Prevalence of Fraud is Again Increasing!
The Levels Stay Elevated
Fewer See Less Fraud
Source: AFP Payments Fraud and Control Survey, Association for Financial Professionals
© 2019 Association For Financial Professionals, Material is not to be used without consent

7. 2014 - 2018 Fraud Survey Webinar Poll Question:
From a fraud perspective, which payment type worries you the most?
Checks
Cards
ACH
Wires
Cash
2014
56%
23% 8% 9% 3%
2015
36%
23%
10%
28% 3%
2016
24%
14% 8%
36% 2%
2017
22%
14% 9%
48% 3%
2018
31%
18%
15%
33% 3%
2019
32%
13%
17%
38% 0%
© 2019 Association For Financial Professionals, Material is not to be used without consent

8. Prevalence of Fraud By Payment Method
(Percentage Distribution of Organizations Subject to Attempted or Actual Fraud)
Payment Methods
Checks
Payment Method Most
Subjected to Fraud
Continues Decline
Wires
Still at Elevated Level
BEC Most Likely the Cause
Cards
Continues to Decline
No Current High Profile
Breaches
ACH Debits
Increased To Record Level
Continue Upward Trend
ACH Credits
Dramatic Increase compared to previous Trend
What is Behind it?
Puzzle Piece 3:
ACH Sees the Only Increase in Fraud
Source: AFP Payments Fraud and Control Survey, Association for Financial Professionals
© 2019 Association For Financial Professionals, Material is not to be used without consent

9. Time Taken to Discover Occurrence of Fraud (Percentage Distribution of Organizations that Experienced Attempted/Actual Fraud)
All SM
Large
All
Almost 70% of Fraud Discovered in Two Weeks – Unchanged
Larger Organizations a Little Slower
But, There is a Delay:
Discovery within a week down to 42% from 47%
The Extra Days are Important – Time for Frausters to get away… SM
Large
All SM
Large
© 2019 Association For Financial Professionals, Material is not to be used without consent

10. Sources of Attempted / Actual Payments Fraud in 2018
(Percentage Distribution of Organizations Subject to Attempted or Actual Fraud)
Fraud is Continuously Changing
BEC Keeps Increasing
Despite Education
Despite “easiness” of Prevention
The “Sophisticated” Fraud Also Growing
Hand-in-Hand with BEC
Notable:
Organized Crime is a Declining Trend!
I made one typo change in title to be consistent
Puzzle Piece 4:
Sophisticated Fraud, Account Takeovers Increase!
Source: AFP Payments Fraud and Control Survey, Association for Financial Professionals
© 2019 Association For Financial Professionals, Material is not to be used without consent

11. Organizations Subject to Attempted and/or Actual Business Email Compromise (BEC) Fraud
(Percentage Distribution of Organizations Subject to Attempted or Actual Fraud)
All
Small
Large
BEC Scams Grow!
First Time Over 50% Report Actual BEC Losses
Trend Shift: Larger Organizations See Big Increase in Attempts and Actual Losses
Smaller Organizations Almost Unchanged A T E M P D F R U A T E M P D F R U A T E M P D F R U A C T U L O S A C T U L O S A C T U L O S
Puzzle Piece 5:
Larger Organizations Bigger Target – Trend Shift
Source: AFP Payments Fraud and Control Survey, Association for Financial Professionals
© 2019 Association For Financial Professionals, Material is not to be used without consent

12. Payment Methods Impacted by Business Email Compromise (BEC)
(Percentage Distribution of Organizations that Suffered from Fraud)
Trend Break!
ACH Credit Sees Huge Increase as Target for BEC Scams
ACH Debits also Increase
Wires Continues to Decline
Still the Most Impacted Payment Method
Checks Decline to its Lowest Level
Big Difference Between Large and Small Organizations
Puzzle Piece 6:
ACH Sees Big Increase as Target for BEC
Source: AFP Payments Fraud and Control Survey, Association for Financial Professionals
© 2019 Association For Financial Professionals, Material is not to be used without consent

13. (Percentage Distribution of Organizations that Suffered from Fraud)
Estimated Total Dollar Amount of Actual Financial Loss Resulting From Business Compromise (BEC)
(Percentage Distribution of Organizations that Suffered from Fraud)
No Losses Drop to 46% from 54%
Increase in Losses up to $50K
Big Increase in Large Losses over $2mm
$100-$250k Elevated - Unchanged
Source: AFP Payments Fraud and Control Survey, Association for Financial Professionals
© 2019 Association For Financial Professionals, Material is not to be used without consent

14. (Percentage Distribution of Organizations that Suffered from Fraud)
Estimated Total Dollar Amount of Actual Financial Loss Resulting From Business Compromise (BEC)
(Percentage Distribution of Organizations that Suffered from Fraud)
- Per company size
Smaller Organizations See More Losses in the Lower Brackets
Larger Organizations Have More Losses in the Higher Brackets
- Not Surprising!
Source: AFP Payments Fraud and Control Survey, Association for Financial Professionals
© 2019 Association For Financial Professionals, Material is not to be used without consent

15. (Percentage Distribution of Organizations that Experienced BEC Fraud)
Internal Control Methods Implemented to Prevent Business Compromise (BEC)
(Percentage Distribution of Organizations that Experienced BEC Fraud)
Large Organizations Have More Internal Controls In Place
Big Differences in Verification of Information Changes (Account Numbers, Etc.)
Also, in Color Coded External s
Low Concern for Phishing?
Source: AFP Payments Fraud and Control Survey, Association for Financial Professionals
© 2019 Association For Financial Professionals, Material is not to be used without consent

16. Times Organization Experienced Attempted or Actual Check Fraud in 2018
(Percentage Distribution of Organizations that Suffered at Least One Attempt of Check Fraud)
Generally, Respondents Indicate Either Few Attempts, or Many
Differences Between Small and Large Org:
Smaller Org. Sees More 1-5 Attempts and Fewer 20 or more Attempts
Larger Org. Sees Fewer 1-5 Attempts and More 20 or more Attempts =
Larger Org. Are Not Protecting Themselves Enough!
Source: AFP Payments Fraud and Control Survey, Association for Financial Professionals
© 2019 Association For Financial Professionals, Material is not to be used without consent

17. Fraud Control Procedures Used to Guard Against Check Fraud in 2018
(Percentage Distribution of Organizations that Suffered at Least One Attempt of Check Fraud)
Looks Pretty Good!
However, Daily Reconciliations Down
Why?
Increased Segregation of Accounts and Payee Positive Pay
A Realization that Protective Measures are Worth it?
Source: AFP Payments Fraud and Control Survey, Association for Financial Professionals
© 2019 Association For Financial Professionals, Material is not to be used without consent

18. Fraud Control Procedures Used to Prevent ACH Fraud
(Percentage Distribution of Organizations that Suffered at Least One Attempt of ACH Fraud)
Few Changes
However, Daily Reconciliations are Down
Debit Blocks Up to the Highest on Record
Separate Accounts Down
Source: AFP Payments Fraud and Control Survey, Association for Financial Professionals
© 2019 Association For Financial Professionals, Material is not to be used without consent

19. (Percentage Distribution of Organizations)
Preparedness for Additional Risks as Faster Payments such as Same-Day ACH Becoming Operational
(Percentage Distribution of Organizations)
More Organizations Overall do not plan for additional Mitigation (Red)
Big Differences Between Small and Large Organizations
Increased Uncertainty (Green)
Fewer Organizations Say they have Already implemented
But More say they are in the Process
All
Small
Large
Source: AFP Payments Fraud and Control Survey, Association for Financial Professionals
© 2019 Association For Financial Professionals, Material is not to be used without consent

20. Corporate/Commercial Cards Most Prone to Fraud
(Percent of Organizations)
T&E Cards and Purchasing Cards are Most Prone to Fraud
Airline Travel Cards seem pretty Safe
Source: AFP Payments Fraud and Control Survey, Association for Financial Professionals
© 2019 Association For Financial Professionals, Material is not to be used without consent

21. Reasons for Loss Suffered with Use of Corporate/Commercial Cards
(Percent of Organizations that Experienced Card Fraud)
Overall 33% of Respondents Experienced Actual Losses from Cards
35% of Large Organizations Had Card Losses
26% of Small Organizations Had Card Losses
Fraudulent Credit Card Charges by a Third-Party Tops
Source: AFP Payments Fraud and Control Survey, Association for Financial Professionals
© 2019 Association For Financial Professionals, Material is not to be used without consent

22. Concerns Regarding Fraud in the Retail Industry
(Percent of Organizations in the Retail Industry)
Greatest Concern are Chargebacks and Card-Not-Present Fraud
Biggest Concern for Large Retailers
Stolen Cards and Gift Cards a Bigger Problem for Smaller Organizations than for Large
Synthetic Identity Fraud is Fairly New but Already Quite a Concern
Source: AFP Payments Fraud and Control Survey, Association for Financial Professionals
© 2019 Association For Financial Professionals, Material is not to be used without consent

23. Puzzle Pieces – Paints the 2018 Payments Fraud Picture
New Record Level of Payments Fraud
What Does All This Mean?
Larger Organizations have become a bigger target for Payments Fraud, in Particular BEC
ACH Fraud is Increasing and the New Trend is the Use of ACH as a Vehicle for the BEC Scams
Together with other Sources this Could Indicate HR Departments are Begin Targeted
An Increase in Account Takeovers Indicates a Growing Trend of Internal Systems Being Compromised
This Could Indicate a Heightened Risk of Successful Phishing Attacks Aimed At Larger Organizations
Phishing May Be More of a Problem than you Think. Be Aware!
Puzzle Piece 2:
Larger Organizations See Increased Fraud
Puzzle Piece 3:
ACH Sees the Only Increase in Fraud
Puzzle Piece 4:
BEC and Sophisticated Fraud, Account Takeovers Increase!
Puzzle Piece 5:
Larger Organizations Bigger Target for BEC
– Trend Shift
Puzzle Piece 6:
ACH Sees Big Increase as Target for BEC
© 2019 Association For Financial Professionals, Material is not to be used without consent

24. Contact Information
Magnus Carlsson
Manager Treasury & Payments
Association for Financial Professionals (AFP)
© 2019 Association For Financial Professionals, Material is not to be used without consent