BETHESDA, Md., March 13 /PRNewswire/ -- Fraud continues to be one of the
most widespread and broad-based challenges corporations face in their payments
operations, causing most organizations to institute policies and practices to
protect themselves against check, ACH and credit card fraud. Increasingly
corporations also must have strong internal controls in place and develop
disaster recovery plans to mitigate vulnerabilities in their payment systems.
A new survey conducted by the Association for Financial Professionals (AFP)
reveals that the majority of organizations have strong defenses in place to
mitigate fraud and operating risk.
"Organizations today are engaged in a variety of initiatives to strengthen
payments risk controls and protect the security, integrity and continuity of
financial transactions," said Arlene S. Chapman, CTP, the Association for
Financial Professionals' Senior Consultant, Technical Services. "They are
building strong defenses against fraud, tightening internal controls over the
payments process and testing disaster recovery plans."
Although many (68%) of the organizations responding to the survey were
targets of payments fraud in 2005, only a minority actually lost money as a
result of check and ACH debit fraud. An organization that was a victim of ACH
debit fraud in 2005 was more likely to suffer a financial loss than an
organization hit by check fraud. Twenty-seven percent (27%) of organizations
that report an incident of ACH debit fraud lost money because of the fraud, as
opposed to 19% of the victims of check fraud. Credit card fraud was more
likely to result in a loss. The majority of organizations (54%) that
experience fraud associated with accepting card payments suffer financial
losses, primarily because they are a "card-not-present" merchant who assumes
liability (e.g., online retailer).
The use of well established tools and services help corporations defend
against payments fraud. Sixty-seven percent (67%) of organizations that
successfully defended themselves from check fraud cite positive pay or reverse
positive pay as the fraud control measure most responsible for the loss
prevention. ACH debit blocks are most responsible for preventing losses by
organizations who experienced debit fraud. Daily reconciliation or monitoring
of balances and transactions was cited by almost as many respondents.
Corporations also must protect against internal fraud. As a result, most
organizations have written payment controls plans. Most of these written
payments policies provide for separation of duties and specifically identify
the departments that are authorized to request and execute payments. While
nearly nine out of ten organizations (88 percent) have a written payments
policy, only 38 percent update their policies on an annual basis. Fifty-four
percent (54%) of organizations made material changes to their payments
controls as a result of Sarbanes-Oxley. Forty-six percent (46%) made no
change; they are more likely to be organizations with annual revenues under $1
billion.
Organizations that strengthened payments controls as a result of Sarbanes-
Oxley perform more frequent audits (28%), require additional approvals (26%),
or require additional documentation related to payment requests (20%). To
ensure compliance with payments control practices, 53% of organizations report
that internal and/or external auditors perform surprise audits.
The Gulf Coast hurricanes last year highlighted vulnerabilities of many
corporations' payments operations. Most organizations (75%) have written
disaster recovery plans that would enable them to continue making and
receiving payments in the event of a natural disaster or systems outage.
However, more than one-third of them test their plans only infrequently and
less than half (44%) have authorization and approval procedures specifically
for employees working off-site or at home. Only 45% of organizations indicate
that their banks have communicated their disaster recovery plans for
processing payments in the event of a disaster at the bank.
The results are from an AFP survey conducted in February 2006 to highlight
best practices for mitigating two categories of payments risk -- fraud risk
and operating risk. The survey also was designed to increase awareness of
actions that treasury and finance professionals can take within their
organizations and in cooperation with service providers, to prepare for the
unexpected. The 352 responses to the survey are the basis of the report. The
typical respondent works for an organization with annual revenues slightly
higher than $1 billion. A copy of the survey can be found at
http://www.AFPonline.org/research.
The Association for Financial Professionals (AFP) headquartered in
Bethesda, Maryland, supports more than 14,000 individual members from a wide
range of industries throughout all stages of their careers in various aspects
of treasury and financial management. AFP is the preferred resource for
financial professionals for continuing education, financial tools and
publications, career development, certifications, research, representation to
legislators and regulators, and the development of industry standards. For
more information about AFP visit http://www.AFPonline.org
SOURCE Association for Financial Professionals
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Related links:
http://www.AFPonline.org
CONTACT:
Tara Meadows of the Association for Financial
Professionals, +1-301-961-8869; or Allan Jordan of Global
Consulting Group, +1-646-284-9452, for the Association for
Financial Professionals
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