Payment fraud is one of the biggest risk management challenges facing corporate treasury managers, and it’s one that businesses must battle on two fronts. Although media attention tends to focus on the emergence of technically sophisticated online banking scams, criminals continue to target paper checks for fraud. Both crimes should be front and center on a treasurer’s radar.
According to the “2013 AFP Payments Fraud and Control Survey” conducted by the Association for Financial Professionals (AFP), 61 percent of organizations experienced attempted or actual payment fraud in 2012. Checks continued to be the dominant payment form targeted by fraudsters, with 87 percent of affected organizations reporting check fraud attempts. Check fraud has been around for a long time, but in recent years criminals have become more proficient at it. The advent of inexpensive desktop publishing equipment has enabled them to create incredibly authentic-looking counterfeit checks. In its most common form, counterfeiting involves creation of fraudulent checks using an organization’s MICR-line data. Criminals also commonly alter the amount or payee name on checks that have actually been issued, or they steal or counterfeit employee paychecks.
Meanwhile, a much smaller proportion of respondents to the AFP survey said they faced attempts at commercial purchasing card fraud (29 percent), Automated Clearing House (ACH), debit fraud (27 percent), or wire transfer fraud (11 percent), although the potential losses are greater via these electronic methods. The typical financial loss among companies that suffered payment fraud in 2012 was $20, 300, according to the AFP.
Who’s Liable for Fraud Losses?
Some corporate managers believe their banks will necessarily bear liability for any fraud losses they incur—and when the treasury team doesn’t fear fraud losses, fraud prevention might not be their top priority. That’s why it’s crucial to understand that businesses can be held liable for payment fraud. These days, banks and their business clients share responsibility for taking appropriate steps to mitigate fraud risk. If a company fails to take these steps, it may bear liability for fraud losses.
In cases of check fraud losses, the Uniform Commercial Code (UCC) is the legal basis for determining liability. Revisions to the UCC in 1990 increased corporate responsibility in check fraud loss situations and softened the burden for banks. Today the UCC requires corporate account holders to follow “reasonable commercial standards” to guard against check fraud. It suggests that banks and corporate account holders should divide responsibility for a loss based on the extent to which each party contributed to the loss by failing to meet reasonable commercial standards.
Kaiser Aluminum Files for Chapter 11 Bankruptcy Protection2002-02-12 19:47:21 by Chapter11
Kaiser Aluminum Corp. and 14 affiliates Tuesday filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code, citing a weak aluminum industry, asbestos-related litigation and high medical and pension costs.
Kaiser a Houston-based holding company that produces and markets aluminum products through its subsidiary Kaiser Aluminum & Chemical Corp., its Chapter 11 petition,...disclosed in its bankruptcy petition it had about 80.8 million shares outstanding as of Dec. 31, 2001. The shares were held or controlled by 368 holders, the top one being Maxxam Group Holdings Inc., with a 34.6% stake. Other top holders were Maxxam Inc., Wellington Management Co., Dimensional Fund Advisers Inc., Capital Group International Inc. and Capital Guardian Trust Co., the petition said.
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