April 16, 2024

AFP Report Finds Check Fraud on the Rise

fraud written on a spreadsheet

After four consecutive years of declines, the number of organizations reporting attempted or actual payments fraud rose considerably in 2023, new research found.

The “2024 AFP Payments Fraud and Control Survey Report” showed the number rose to 80%, up from 65% in 2022. Checks continued to be the most problematic payment method, with 65% of organizations reporting check fraud activity. 

“The fact that check fraud remains the most prevalent form of payments fraud is not surprising,” researchers wrote. 

Additionally, the report noted that, “Check fraud related to mail theft has become a significant issue for organizations and, more importantly, for the banking industry as they are easy targets for check fraud via mail.” And even as check processing volume at the Federal Reserve declined 8%, AFP pointed to a 40% increase in check-related Suspicious Activity Reports filed with the Financial Crimes Enforcement Network. 

“Increasing check fraud should be reason enough for businesses still issuing paper checks to ditch them in favor of secure, reliable ACH payments,” said Michael Herd, Nacha Executive Vice President, ACH Network Administration. “B2B volume on the ACH Network climbed almost 11% last year, and the first quarter of 2024 saw continuation of that growth. No business should still be mailing checks.”

Business email compromise (BEC) continues to be a major fraud concern, and the AFP report found that many businesses still need to step up their game to fight it.

“Less than 60% of organizations have completed the documentation that includes the creation of written policies and procedures which are required to safeguard against BEC, while less than half (49%) have completed testing these policies. Although BEC has been prevalent for over a decade, findings reveal a gap in preparedness to mitigate scams via email,” the report found.

AFP also noted that ACH credits were most often targeted by criminals attempting BEC. To fight that, Nacha members last month approved a new set of rules establishing a base-level of ACH payment monitoring on all parties in the ACH Network, except for consumers.

The new rules follow the flow of a credit-push payment to promote the detection of fraud from the point of origination through the point of receipt at an account at the Receiving Depository Financial Institution (RDFI). RDFIs will, for the first time in the Nacha Rules, have defined requirements to monitor inbound ACH credits.

Jane Larimer, Nacha President and CEO, noted that approval of the rules marked “a significant act in the industry’s self-governance of the ACH Network and will promote the ongoing safety and security of the ACH Network.”

Nacha officials also noted the AFP survey findings are a good reminder of the need for corporates to remain vigilant against fraud attempts and to treat requests for payment with skepticism.

The “2024 AFP Payments Fraud and Control Survey Report” is available for download from the Association for Financial Professionals.