Treasury Management · July 20, 2020

Deter ACH Fraud by Monitoring Your Accounts

If you've been in business long enough to remember heading to the bank with canvas deposit bags stuffed with checks and cash, you know what a time-consuming and risky hassle that could be. The evolution of electronic bank-to-bank transfers through the automated clearing house, or ACH, has proven invaluable to business owners. It helps them conserve resources, as well as improves security and safety.

If you've been in business long enough to remember heading to the bank with canvas deposit bags stuffed with checks and cash, you know what a time-consuming and risky hassle that could be. The evolution of electronic bank-to-bank transfers through the automated clearing house, or ACH, has proven invaluable to business owners. It helps them conserve resources, as well as improves security and safety.


ACH basics

Today's ACH system, which facilitates the electronic movement of funds between banks, is probably best known for direct deposit. This feature ensures that take-home pay seamlessly appears in employees' bank accounts every payday. It also provides the infrastructure for the same-day payments made popular by social payment platforms.

This national system launched in 1974 by pulling together a number of regional ACH networks. It's currently overseen by the National Automated Clearinghouse Association, an industry-backed organization known as Nacha.

Having evolved exponentially from its old-school mainframe roots, the ACH system handles tens of billions of transactions worth tens of trillions of dollars every year. While long popular for payroll purposes, it's taken longer for businesses to adopt the ACH system to pay vendors and other invoices. Today, electronic transfer is becoming an increasingly popular method of business-to-business payment.

Avenues for ACH fraud

For all of the technological advances the ACH system has made, it remains a prime target for criminals. Just as fraudsters found ways to scam the system when it relied upon paper checks, they've discovered how to electronically siphon funds from unsuspecting companies.

As many as one-third of businesses experience ACH fraud per year, with fraudsters tapping systems through:

  • Email-based phishing attacks
  • Account takeovers
  • Bogus payroll activity
  • Deceptive communications appearing to come from the FDIC
  • Fake appeals around topical issues such as the coronavirus

Once a thief gains access to an account, there's little to guard against the funds disappearing. These attacks can leave you scrambling for cash while customer trust in your business erodes.

Keep an eye on your accounts

To head off automated clearing house fraud, many banks have ramped up protective measures such as encryption, multifactor authentication and sophisticated transaction oversight.

As for your business, it's essential to stay on top of the virtual cash flows in your accounts. To help, many banks have developed automated monitoring services that feature:

  • Streamlined oversight of all transactions
  • Filtering capabilities to facilitate automatic payments to trusted vendors
  • Additional approval requirements for unfamiliar transactions
  • Proactive notifications of suspicious activity

Because business accounts receive less leeway than personal accounts, there's added urgency to spot and address ACH fraud. For example, if a fake vendor withdraws thousands from your company account, you only have a day to notify your bank if you hope to recover the stolen funds.

The virtually frictionless process behind ACH payments can enhance your business' cash flow. To truly enjoy the upside, it's critical that you don't let your guard down.

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This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.