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BizReport : Internet : April 06, 2011

No improvement in banking fraud protection for SMBs

Financial institutions continue to lose money and customers due to a lack of action being taken to prevent corporate account takeover and fraud, according to a new study from fraud prevention firm Guardian Analytics and the Ponemon Institute.

by Helen Leggatt

guardian analytics logo.gifAccording to Guardian Analytics' CEO, Terry Austin, there has been no improvement in the banking industry's ability to stop the unlawful siphoning of money from SMBs with compromised accounts.

In the last year, 56% of SMBs reported experiencing payments fraud, or attempted payments fraud, while three-quarters reported experiencing account takeover and fraud via online banking channels. Those levels show no improvement on 2010's rates.

The study also found that 78% of bank scams involving SMB accounts weren't discovered until after funds were transferred outside of the institution.

Furthermore, 70% of SMBs believe it is their bank who is ultimately responsible for the security of their money.

The result? A high churn rate. Many businesses choose to move their banking activities after experiencing fraud with about 10% terminating the relationship and 33% who move their primary banking activities.

It's a lose-lose situation for banks and businesses - only the criminals are winning.

"This year's data again affirms that businesses' trust in their banks is quickly damaged and they are not willing to give their banks a second chance," said Dr. Larry Ponemon, chairman and founder, Ponemon Institute.

"As online and mobile banking adoption continues to grow, the possibility for more fraud and more lost customers escalates. Endpoint security will be challenged to keep up with the growing number of devices and threats, and banks are in the best position to take the lead on proactively protecting all account holders from the wide variety of threats."

The research reveals SMBs aren't sitting on their laurels when it comes to protecting themselves.

Over three-quarters conduct a monthly account reconciliation exercise, a quarter have a dedicated computer for online banking, 49% use dual controls, 21% use positive pay and 55% of businesses practice daily reviews and approvals of outgoing transactions. A small number (16%) educate their staff in fraud prevention methods.

Tags: banking fraud, fraud protection, online banking, payment fraud, SMB

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