SMALL BUSINESS FRAUD REPORT

Transcription

1 ANALYTICS SMALL BUSINESS FRAUD REPORT USA 1 VOCALINK ANALYTICS: SMALL BUSINESS FRAUD REPORT

2 THE ISSUE OF PAYMENTS FRAUD Payments fraud occurs when companies pay money erroneously to a fraudster rather than a legitimate supplier. Once processed, the funds are laundered at speed through the banking system, making it difficult to trace. Stolen funds are rarely recovered, leaving financial institutions and sometimes their customers to bear the cost. No business is too small to be targeted. The BEC/EAC ( account compromise) scam continues to grow, with fraudsters targeting all types of businesses from sole traders through to global organisations. Between January 2015 and December 2016, there was a 2,370% increase in identified exposed losses. 1 It is a threat serious enough to prompt the FBI in May 2017 to release an updated Public Service Announcement (PSA) regarding the continued growth and evolution of the crime. No business is too small to be targeted KEY RESEARCH FINDINGS Payments Fraud is on the Rise Official FBI figures estimate that there have been over 40,000 cases, totalling more than $5.3bn lost globally to Business Compromise (BEC) fraud alone over the last three years. These types of fraud have devastating impacts on businesses. Lack of Awareness and Education Our research shows a continued and worrying lack of awareness of the potential impact of payments fraud. Approximately 1/3rd (33%) of small businesses in the US surveyed haven t heard of payments-related fraud such as BEC, CEO fraud and Invoice Fraud Awareness is highest on the East Coast (73%) and West Coast (70%) with the lowest awareness of these types of fraud in the Eastern North Central States (39%) and the Mountain States at 38%. Lack of Preventative Action Many small business owners across the US are yet to take action to help protect their businesses. 33% have not made changes to prevent payments fraud 44% of small businesses on the Pacific Coast have made some changes to prevent fraud compared with 41% of business in the Mountain States who say that they have made no changes VOCALINK ANALYTICS: SMALL BUSINESS FRAUD REPORT

3 THE RESULTS IN DETAIL The most surprising and concerning finding is the low level of awareness of payments fraud amongst small business owners, entrepreneurs and board members. Just over a third (33%) of small businesses say that they are unaware of BEC, CEO fraud or invoice redirection and mandate fraud. Additionally, our research shows: 51% of small business owners and 70% of board members stated that they didn t believe invoice redirection, mandate and CEO fraud were a genuine risk to the business. 61% of small businesses that have been unsuccessfully targeted by fraudsters have made changes. For those that have been victims, 75% have made changes although 59% still haven t implemented a specific policy to double check invoice details. Almost one third (31%) of all small businesses say that they wouldn t know who to call if they were subject to invoice fraud. 77% of small businesses, which have been victims of payments-related fraud, believe that it is now the biggest risk to their business, and 66% also worry that it will be an even bigger issue for them in Despite 31% of small businesses claiming that they knew a business that has been a victim of fraud, and that the business lost thousands of pounds as a direct result, 44% believe that losing clients or staff members remains a bigger risk to their business. Banks are the most trusted organisations that small businesses will turn to for help if they were the victim of payment-related fraud according to 52% of businesses polled. 33% of businesses have not made any changes to prevent payments fraud. 3 VOCALINK ANALYTICS: SMALL BUSINESS FRAUD REPORT

4 VOCALINK ANALYTICS: SOLVING THE PROBLEM Vocalink Analytics Financial Crime Solutions overlay payments data with leading-edge data science tools and techniques to develop ground-breaking solutions and protect the legitimate users of payments systems. Specifically targeting the issue of payments-related fraud, our Corporate Fraud Insights solution is designed to identify and flag suspected fraudulent transactions early in the transactional cycle.using advanced, self-learning and behavioural analytics to determine whether payments are high risk, our Corporate Fraud Insights solution is already live in the UK, helping to prevent fraud right at this moment. On a daily basis, Corporate Fraud Insights analyses potentially tens of millions of transactions to identify high risk payments which fit the characteristic of these types of frauds and deliver a manageable number of alerts, precisely tuned to a customer s preference. The alerts are rank-ordered by potential risk so clients can prioritise investigation activities. The accuracy of the solution (built on historical client data) minimises the incidence of false positives. Our Corporate Fraud Insights solution is already live in the UK, helping to prevent fraud right at this moment CORPORATE FRAUD INSIGHTS Corporate Fraud Insights specifically identifies CEO, BEC and Invoice fraud: Invoice Redirection: This fraud occurs when the beneficiary account number is different from prior history between beneficiary and payer due to a fraudster duping a business into redirecting the regular payment details to the fraudulent account; New Relationship: This fraud occurs when there is no payment history between payer and beneficiary, i.e. the beneficiary account has not been seen before and there is no payment history with the beneficiary name. Fraudsters often do this by either intercepting the first invoice to a new supplier or by convincing finance teams to pay a bogus invoice. A key attack that can be identified with these alerts is CEO/BEC fraud, which is currently an extremely high profile and damaging type of fraud. KEY BENEFITS Key benefits of Corporate Fraud Insights: Identifies and flags likely incidences of payment-related fraud before the funds leave a victim s account Enables an analyst to work and adjudicate alerts efficiently with minimal need to use internal systems Quick and simple to implement, with little systems integration required We continue to develop additional anti-fraud solutions. For more information about our Financial Crime Solutions, visit vocalink.com/ analytics/financial-crime-solutions 4 VOCALINK ANALYTICS: SMALL BUSINESS FRAUD REPORT

5 WHAT IS THE SMALL BUSINESS FRAUD REPORT? The Vocalink Analytics Small Business Fraud Report is considered the annual and definitive barometer for payments-related small business fraud in both the US and the UK. The report canvases entrepreneurs, business owners, managers and directors on their response to, and experience of, the following types of payments fraud: Business Compromise Sophisticated scam whereby fraudsters gain access to, or spoof, internal addresses (sometimes called man-in-the-middle ). They often target businesses working with foreign suppliers and/or businesses that regularly perform wire transfer payments. CEO fraud Where cybercriminals use social engineering to impersonate executives and trick other employees into executing unauthorized wire transfers or sending tax and sensitive information. Invoice redirection and Mandate fraud High-value fraud targeting companies where false payment invoices and payment directions are sent to a supplier s customer. 5 VOCALINK ANALYTICS: SMALL BUSINESS FRAUD REPORT

6 ABOUT VOCALINK ANALYTICS Vocalink is a Mastercard company and payments technology partner to banks, corporates and governments. Together we re redrawing the lines of what s possible in payments by bringing bank account- and card-based payments under one roof, enabling payment innovation and choice. Vocalink Analytics leverages the power of bank account payments data to develop innovative insight-based solutions that solve known problems. We help companies to improve their business by supporting their regulatory obligations, creating a frictionless customer experience and enhancing operational efficiencies. By combining cutting-edge data science techniques with an intimate knowledge of payments data based on Vocalink s heritage as the trusted, secure operator of the UK s payments networks for nearly 50 years we develop solutions that will improve outcomes for people, businesses and the wider economy. We have a range of new and innovative financial crime and assurance solutions, including: Corporate Fraud Insights Identify and flag likely incidences of payment-related fraud before the funds leave a victim s account Enable an analyst to work and adjudicate alerts efficiently with minimal need to use internal systems Quick and simple to implement, with zero systems integration required AML Insights Identify suspect money mule networks Provide insights on money mule behaviours Track funds through the financial system Provide graphical representations, insights, and statistics Technology can be scaled up to support live data/analytics feeds Repatriation of lost or fraudulent funds ABOUT THIS RESEARCH The Vocalink Analytics Small Business Fraud Report was conducted amongst 500+ small businesses in the UK and US from 9 16 October 2017 by Populus on behalf of Vocalink Analytics. This report focuses specifically on the results from the US. MORE INFORMATION For more information, visit: vocalink.com/analytics To contact us, info@vocalink.com For regular payments news and insights visit connect.vocalink.com 6 VOCALINK ANALYTICS: SMALL BUSINESS FRAUD REPORT

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