Top 10 fraud threats that won't go away

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Fraud is a perennial problem. But some types of fraud are even more challenging to address and eliminate. In the current economic environment, it will take many years before our industry has the focus or resources to dramatically upgrade its fraud-detection methodology. Even with the desire and the tools, it's impossible to detect all fraud early enough in the payment process to eliminate it entirely. Here I take a look at the top ten fraud threats that just will not go away.

Threat #1 - Cross Channel Fraud

Online, ACH, check, debit, wire — more channels mean more opportunities for fraud. No matter how effective they are at addressing a one dimensional problem, siloed fraud solutions can't effectively address the broader problem of cross-channel fraud. And they can't detect organized fraud rings, which tend to use multiple channels. Look for cross-channel fraud to rise as fraudsters exploit weaknesses in fraud detection.

Threat #2 - Identity Theft

Identity theft keeps growing, thanks to high-profile data breaches from retailers, universities, hospitals, and the government. Despite more awareness of the problem and stronger legislation, many companies still fail to protect confidential customer data. And individuals continue to fall for scams that compromise their data. So identity theft continues to be a threat.

Threat #3 - On-Us Check Fraud

Check volumes are declining. But check fraud is on the rise. Why? One major reason is business-to-business payments. There really is no easy way for one business to pay another currently other than via check. Another reason is that check fraud takes so many different forms and is so easy to commit. Often, investigators can't determine who counterfeited a particular batch of checks that generated large losses. Therefore, perpetrators are free to continue their crimes.

Threat #4 - New Account Fraud

The ABA's most recent Deposit Account Fraud Survey attributes 26% of both fraud losses and cases to new accounts. Why? Because it's always a challenge to separate new accounts created by honest customers from fraudulent accounts opened by criminals or collusive rings. And new account fraud is inherently a cross-channel fraud problem. So new account fraud isn't going away-it remains one of the most vulnerable points in the customer continuum.

Threat #5 - Credit Card Bust-Out

Credit card bust-out is hard to spot, since it starts with legitimate customers who then max cards to their limit, fence the purchases, recycle funds, and more. Many card companies and banks don't have the technology they need to detect and shut down individuals and rings. As long as losses stay low, they're just a cost of doing business—one that's often misclassified as credit losses. Without being recognized and addressed, credit card bust-outs will continue to flourish.

Threat #6 - ACH Fraud

ACH fraud will continue to be a growing threat, both from an origination and receiving bank perspective. With the advent of check conversion, fraud became an inherent part of the ACH network. Every time a fraudulent (counterfeit, forged, or altered) check is converted to an ACH debit, it creates a fraudulent ACH transaction. Banks are piloting clearing additional check volume by converting checks to ACH debits, which may further increase ACH fraud.

Threat #7 - Deposit or Payments Fraud

Whether deposits and payments are made via check or ACH, there is a period of time before transactions can be verified. Until loss prevention can be accurately performed by the time of value transfer for the transaction, fraudsters have an advantage they will exploit, and this type of fraud will continue.

Threat #8 - Debit Card Fraud

Debit card fraud has increased dramatically in recent years-thanks to counterfeit cards, compromised PINs, and new scams. Every time banks take evasive action, the fraud will morph. This type of fraud is just too lucrative for organized crime rings to give up on easily.

Threat #9 - Online Account Takeover

Fraudsters can gain access to online credentials through a wide variety of mechanisms. Once they do, the bank has great difficulty identifying their actions unless they have sophisticated tools in place. Once a fraudster has online access to a business' accounts, they can open new accounts to direct deposits to, submit fraudulent ACH files, generate wire transfers, and much more. Extremely large losses result when banks are unable to detect and prevent these activities, so this type of fraud will continue to appeal to fraudsters.

Threat #10 - Organized Fraud Rings

Organized crime is the most difficult fraud to detect and stop, primarily because it is sophisticated and well-planned. Although many of the or individuals who commit the fraudulent activity may be apprehended, it is very rare to catch the ringleader/mastermind. Because these fraudsters are nimble and are rarely caught or prosecuted this type or organized crime will keep growing. How does this list sound to you? Any other types of fraud that you don't see ending anytime soon? Let me know. Like any Top 10 list, this one is constantly being revisited and updated.