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Take On Payments, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, is intended to foster dialogue on emerging risks in retail payment systems and enhance collaborative efforts to improve risk detection and mitigation. We encourage your active participation in Take on Payments and look forward to collaborating with you.

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September 12, 2022

The Not-Quite-Forgotten Check

When did you last write a check? Last month, I wrote my first check in almost 10 years to send funds to sponsor an out-of-state friend for a charity event. This was after I failed to convince my Luddite friend to sign up for an electronic peer-to-peer (P2P) app so I could send the funds almost instantly.

That experience caused me to think a bit more about that somewhat forgotten payment method: the hand-written paper check. The triennial Federal Reserve Payments Study as well as the annual Diary of Consumer Payment Choice (DCPC) have consistently shown that check usage continues to decline. The 2020 DCPC revealed that of the average of 35 payments (including cash) made per month, 2.3 were made by check. The 2016 DCPC showed an average of 46 payments per month with 3.3 of those using a check. While the share of overall payments made by check dropped by just about one-half of a percentage point, the absolute number of checks written dropped by 30 percent in just those four years.

With the decline in check usage, why are financial institutions and merchants seeing an increase in fraud losses related to checks? The simple answer is because checks are easy to counterfeit or alter. The industry has made efforts over the years to improve check document security, including techniques such as microprinting, holograms, embedded fibers, and tamper-resistant paper. Despite these defenses, most would consider the check to be "low tech" and, as this blog has often stated, criminals go for the low-hanging fruit, making checks ripe for the picking. Anyone with graphics software and a high-quality printer can readily turn out counterfeit checks. Blank check stock, some even incorporating the defenses mentioned above, can be purchased at most office supply and stationary outlets. The 2022 Association of Financial Professional's Payment Fraud and Control: Key Highlights Adobe PDF file formatOff-site link report noted "that check fraud remains the most prevalent form of payments fraud," with two-thirds of their professionals reporting their organization had experienced some level of check fraud.

Losses from check fraud come in a variety of forms. I wrote about cashier's check fraud scams in a recent post. Criminals often use money mule networks to cash counterfeit checks or to purchase with a counterfeit check merchandise that the criminal then sells at a discounted price. The criminal may deposit counterfeit or altered checks and then take advantage of the time gap between funds availability and when the check is returned after being identified as fraudulent. Check out this comprehensive guide to check fraudOff-site link.

The industry is now seeing small to mid-size financial institutions and merchants targeted. To mitigate check fraud, the best action for both consumers and businesses is to monitor checking accounts closely to spot any unauthorized items posting to the account. For businesses, consider positive-pay software that automatically alerts you of incoming checks with altered amounts or checks that may have been counterfeited. For financial institutions, software that verifies document integrity or detects transaction data anomalies can be useful. For merchants, third-party check verification services as well as strong customer documentation will help minimize losses.

Although it may be another decade before I write another check, the prevalence of check fraud relative to check use suggests that Take On Payments will continue to highlight this topic and discuss the industry's efforts to combat fraud.

June 13, 2022

Quishing: Another "Fish" in the Fraud Ocean

We should all be knowledgeable about phishing attacks by now, given the number of warnings consumers and businesses get about this type of email fraud. We've even warned about it, in this Take On Payments post last year, and in others. We've also warned about smishing, a variation that uses SMS text messaging rather than email. Vishing is another form of social engineering that we've also mentioned in the blog. It's like phishing but comes through a telephone, often from a spoofed number—one that looks like a legitimate number of a company or agency. All of these varieties of fraudulent attacks have the same goal: to "fish" for your login or account information.

And now there's quishing. Again.

Quishing is not new but has experienced a revival within the criminal element as a result of the increased use of QR codes for digital payments. We first wrote about the risks and benefits of QR codes back in 2012, when they were used predominantly on printed media such as billing statements. The account holder could scan the QR code to go to the biller's payment website to pay their bill. We wrote about them again in late 2020, when merchants used them in the pandemic as an alternative contactless payment technology to near field communication. Since then, the use of QR codes has exploded—not just for payment applications, but also for other contactless usages born from health concerns: to let people access digital restaurant menus, for example, or to get detailed product information. QR codes are easy to implement, but that also makes them easy to alter without detection. The criminal sends an email with a QR code that, when captured by the victim's camera, opens a counterfeit website that may look like a merchant's legitimate website but is intended to steal account credentials. The email may contain a coupon to give the victim further incentive to capture the QR code. Unfortunately, detecting quishing attacks is difficult for email malware applications since the QR code is embedded in the email message.

QR code manipulation can also take place on printed material. Cases have been reported where stickers with altered QR codes have been placed on event posters at a venue or in other public places. When the person accesses the fraudulent QR code to purchase event tickets, the criminal captures the payment card information then uses that information to make fraudulent purchases. Meanwhile, the victim shows up at the event and is told their ticket confirmation is invalid.

The same defensive measures used to spot phishing, smishing, and vishing attacks should be used to guard against quishing attacks. Be wary of messages from unknown sources, especially if they offer an incentive or convey a sense of urgency. Always be suspicious of any request for you to "confirm" your account credentials. Keeping a solid defensive position will help keep you safe from these attacks.

April 18, 2022

Smishing: Phishing with a Different Bait

The Retail Payments Risk Forum team is always on the lookout for changes in attack patterns by the criminal element regarding payments. Our sources of research include industry news, networking with payments stakeholders, third-party reports, and our internal security warnings. One other source we have is our own personal experience, though we have to remind ourselves of our colleague Claire Greene's warning that each of us is a sample of one. What we experience may not be, and probably isn't, what the average person might encounter.

I was recently reminded of this warning with regard to my own experience with smishing attacks. Unlike phishing, which uses email, smishing uses SMS text messages to entice you to click on a malicious link that either loads malware on your phone or, more likely, directs you to a fake website to capture your login information. (Simply opening the text message poses little risk.) Over the last several weeks, I have been getting one to two text messages a day on my phone asking me to click on a link to respond—usually to a customer satisfaction survey allegedly from a major retailer, with the offer of a gift card as a reward for responding. One message informed me that a product I had ordered (and already received) from an online retailer couldn't be shipped until I clicked on the link to pay an international tax of $2.83. I am confident that all these messages were "smishing" attempts.

Although a part of me was tempted to assume my experience was indicative of a very recent trend, I decided to research whether I was indeed average in experiencing an increased number of these attacks. It appears Claire was right—although my research showed that smishing attacks have substantially increased, seems I am fortunate to have only recently become a target. A cybersecurity firm that claims to handle 80 percent of mobile messages in North America has reportedOff-site link that the number of smishing attacks during the third quarter of 2020 had increased 328 percent over the previous quarter. The FBI's Internet Crime Complaint Center (IC3) doesn't separate smishing from phishing, vishing (phone calls), or pharming (redirection to a fake website) incidents, but the IC3's Internet Crime Report 2021 Adobe PDF file formatOff-site link shows that these complaints increased 34 percent from 2020 to 2021.

The warning signs for a smishing message are quite similar to those of a phishing attack and may include the following:

  • A sense of urgency, pushing you to respond right away. As we are now in income tax season, these messages may include references to past due taxes or a suspended refund.
  • An offer of a reward such as a gift card, rebate, or a coupon for a future purchase from the retailer
  • Poor English grammar or improperly formatted phone numbers
  • An unknown sender. It is best to report or delete messages you weren't expecting from people you don't know.

Be aware that what appears to be the sender's phone number is often spoofed. It may be a familiar number or at least may have a local area code. This is intended to increase your trust and thus the likelihood that you will respond.

Likewise, the protective measures you should take to protect yourself against falling victim to a smishing attempt are similar to any other safeguards you take:

  • Keep your mobile device software and browsers updated with the latest security upgrades.
  • If you are in doubt about the legitimacy of the message, do not use the link or phone number provided in the text to contact the sender. If the message appears to be from someone you know or a business you are familiar with, find their number in your contacts or online and contact them directly.

I realize that the criminals launching these types of attacks are generally using automated systems to transmit hundreds of thousands, if not millions, of the messages in hopes of getting even just a small percentage of recipients to click on the link. So even if you are like me and not average, there is a good chance you have been or are likely to be the target of a smishing attack. I hope you will use information to not become a victim, and distribute it to help keep others from falling victim.

October 12, 2021

Scams and Student Loan Forbearance

If you are a millennial like me, sitting on a mountain of student loan debt, chances are you've probably received at least one call or letter a month with offers to suspend your student loan payments as part of the administrative forbearance set by the Coronavirus Aid, Relief, and Economic Security—or CARES—Act. In fact, I recently received a letter stating that I was "prequalified" to have my federal student loans forgiven in exchange for an upfront fee. Of course, not all of the unsolicited letters and calls are scams, but if you're asked to pay a fee to have your student loans canceled, it's a safe bet that those offers are more than likely scam tactics.

Although student loan forgiveness scams have been around for some time, fraudsters claiming to be affiliated with the Department of Education are exploiting the current economic uncertainty by creating confusion around how borrowers can qualify for the administrative forbearance program. Some fake companies will offer to work with borrowers to negotiate a lower repayment plan for free and then request that they send their payments directly to the company rather than to the lender. Furthermore, scammers may ask for personally identifiable information or the borrower's Federal Student Aid (FSA) login credentials in hopes of stealing the borrower's identity or money. In a time when unemployment is high and many are financially vulnerable, people are likely more willing to take risks if it means obtaining some desperately needed financial relief—and fraudsters are well aware of this.

So what should you do if you are contacted by a company offering student loan debt relief? The FSA recommendsOff-site link you look out for these red flags before you respond:

  • They require you to pay upfront or monthly fees.
  • They promise immediate and total loan forgiveness or cancellation.
  • They ask for your FSA ID username and password.
  • They ask you to sign and submit a third-party authorization form or a power of attorney.
  • They claim that their offer is limited and encourage you to act immediately.
  • Their communications contain spelling and grammatical errors.

The FSA also listsOff-site link some examples of common phrases that scammers use in their communications:

  • "Act immediately to qualify for student loan forgiveness before the program is discontinued."
  • "You are now eligible to receive benefits from a recent law that has passed regarding federal student loans, including total forgiveness in some circumstances. Federal student loan programs may change. Please call within 30 days of receiving this notice."
  • "Your student loans may qualify for complete discharge. Enrollments are first come, first served."
  • "Student alerts: Your student loan is flagged for forgiveness pending verification. Call now!"

Although the latest extension of the administrative forbearance into early next year may be a huge relief for many borrowers, it unfortunately also means that scammers have more time to exploit the situation. I encourage you to read an FSA articleOff-site link that contains other helpful information on how to identify and report a student loan scam.