Business Email Compromise and Check Fraud Continue to Hit U.S. Businesses, Report Finds

Author

Michael W. Kahn

Michael W. Kahn

Nacha

Business Email Compromise (BEC) and check fraud continued to give U.S. companies major headaches in 2020, a new report from the Association for Financial Professionals (AFP) found.

More than three-quarters of organizations were targeted by BEC attacks, according to the “2021 AFP Payments Fraud and Control Survey Report.” BEC typically involves scammers sending emails that appear to be from a trusted source, such as the CEO or other managers, or vendors. The emails trick employees into revealing sensitive information or changing payment information. 

“While treasury and finance leaders are very aware of how widespread this type of fraud has become, they are not able to obstruct it sufficiently. Fraudsters are successfully infiltrating payment activity at organizations by using email to do so. Their success in deceiving organizations encourages them to continue to use BEC,” the report concluded.

The 34% of companies taking a financial loss from BEC is down slightly from 2019, and the lowest in recent years. AFP said the decrease is “likely due to enhanced employee training and stronger controls implemented as well as a decline in payment transactions due to the pandemic.” 

While the majority of companies suffering BEC losses said the total was $50,000 or less, the report noted that if an attack exposes confidential information, “the nonfinancial damages—while difficult to quantify—can be severe.”

AFP also found that checks continued to be the top payment method impacted by fraud in 2020, with 66% of payments professionals reporting check fraud activity, down from 74% a year earlier. The report found a fairly simple explanation: “Contributing to the decline in check fraud is the fact that organizations are using fewer checks in their B2B transactions as well as increasing the use of electronic payments as a consequence of staff working remotely.” 

That finding is consistent with what Nacha is seeing on the ACH Network, said Michael Herd, Nacha Senior Vice President, ACH Network Administration. 

“The pandemic has accelerated the shift in B2B payments from check to ACH. B2B payment volume on the ACH increased by more than 10% in 2020, and so far in 2021 is up 17%,” said Herd.

The Federal Reserve earlier reported commercial check volume continued to decline in 2020, falling 14.2% to 3.7 billion, less than half of what it was a decade earlier. 

“ACH continues to be far safer than checks, so the shift away from B2B checks is a positive result for the industry,” said Herd. “Fewer checks mean fewer opportunities for check fraud.”

Nacha’s ACH Quick Start Tool can help businesses learn how to pay or get paid using ACH.

Visit Nacha’s Current Fraud Threats page for timely information on BEC and other scams.