Escalating payment fraud continues to concern bankers

Banks and credit unions have grappled with payments fraud for decades, so it’s not surprising the 2019 Federal Reserve Payments Fraud Insights white paper found that fraud attempts and losses continue to be widespread.

Synthetic identity fraud is the fastest growing type of financial crime in the United States. According to the Fed report, this type of fraud is used to deceive government or corporate systems into thinking the perpetrators are real people, so the government or corporate systems grant them access. This creates far-reaching impacts on not just on the financial industry, but the healthcare industry, government entities and individual consumers. When money is stolen, it's often up to financial institutions to bear the burden. 

Emerging fraud trends

Synthetic identity fraud is just part of a larger picture, however:

• Synthetic identities are created in this way:
  • A fraudster creates an identity using stolen or made up information
  • The fraudster apples for credit repeatedly until approved
  • The fraudster quickly develops positive credit history
  • The fraudster maxes out credit cards and/or defaults before disappearing
• Gaps in the credit process make synthetic identities possible: According to the Fed, if a fraudster applies for credit at a financial institution using a synthetic identity, the credit bureau automatically creates a new credit profile. The new credit profile becomes the synthetic identity’s so-called “proof” of existence. 

The costs of identity theft affect most financial institutions, as the AFP Payments Fraud and Control Report shows 82% of companies were targets of payments fraud last year. This demonstrates the need for cybersecurity protocols and strict control governance. 

It pays to remember that if our increasingly digital business environment creates more opportunity for criminals, it also generates more opportunity — and incentive — for companies to collaborate, pool resources and share ideas on how best to fight payments fraud.

Take steps to prevent fraud

In addition to keeping law enforcement and government agencies apprised of fraud situations, you can maximize your security with products and services. Deluxe offers a range of identity theft services designed to protect account holders and financial institutions alike from fraud attacks and account abuse.

To further protect your payments, and institution, consider eChecks. Not only are they simple to send, but they're secure and nearly instantaneous. No banking information is ever sent via email, and each eCheck's authenticity is easily verifiable. In fact, eChecks are more secure than paying with paper checks.

Take steps now to help prevent fraud in your organization.  

This content is accurate at the time of publication and may not be updated.