Check Processing

Automated Clearing House Fraud Prevention Tactics to Protect Your Business

Read Time: 5 min

If you use ACH processing for your business, it’s important to understand the risks associated with automated clearing house fraud. Making transactions through the Automated Clearing House Network is typically secure. However, as a business owner, you may still want to know more about ACH security and risks. Understanding these risks can help you protect your customers and your business’s information. After all, you want to make sure you can be confident that ACH is safe. In order to do this, it’s important to regularly perform an ACH risk assessment. This will tell you where your vulnerabilities are. Then, you can employ some of the many ACH fraud prevention tactics that can help you keep your business’s data safe. Read on to learn everything you need to know about ACH fraud and how to prevent it.

What is Automated Clearing House Fraud?

ACH fraud involves the theft of money during an ACH transfer. Because the ACH network serves as the central clearing network for electronic funds transfers (EFTs), it is critical you check for any signs of ACH debit fraud or ACH payment fraud. To address if ACH is safe, you need to see where you stand with respect to ACH risk. To take the necessary steps, you need to define automated clearing house fraud.

Is ACH safe?

ach security risk assessment

Yes, Automated Clearing House processing is safe. In fact, it is known as one of the most secure ways to accept CNP transactions. This is due to its involvement with the Automated Clearing House Network as well as how it connects to customers’ bank accounts directly.

Despite ACH’s basic security, you still need to recognize ACH fraud protection by implementing ACH risk management protocols when setting up ACH payment processing for your company. You can start this by performing an ACH risk assessment. The following information will give you a better idea about how to ensure ACH security.

So what can you do, as a business, to safeguard yourself from ACH transfer fraud?

5 ACH Fraud Prevention Tactics

To protect your business against ACH fraud, you can use several strategies. These activities include scrutinizing account activity, separating debit and credit transfers, familiarizing yourself with recurring vendor charges, installing tools that alert you to suspicious account activity, and keeping up-to-date on the latest activities that counter or reduce ACH risks. Let’s get started!

1. Monitor your account activity

To stop ACH payment fraud in its tracks, it helps to work with an ACH processor to deter ACH risk. This means checking daily returns on accounts that have settled and assessing related reports occurring daily, weekly, or monthly.

Establish multiple authentication standards

Banking professionals and law enforcement officers emphasize, when conducting an ACH risk assessment, that ACH users institute multiple ways to authenticate account access. One of the best ways to do this is to make sure that account holders establish a PIN and/or an account password and set up security questions.

2. Keep your credit and debt ACH transfers separate

To ensure you consistently maintain ACH security, you need to make sure your ACH debits and ACH credits are recorded separately. Doing so will make it easier to reduce the chance for ACH fraud and help you reconcile your accounts with more ease.

3. Familiarize yourself with recurring vendor charges

Do you have vendor charges you regularly pay each month? If so, it helps to familiarize yourself with the costs so you can stay on top of your ACH transfer activities. By familiarizing yourself with the charges, you are more likely to spot transactions that do not make sense.

4. Install alert tools for your accounts

Always stay up-to-date on any activities that may harm your business or the relationships with your customers/vendors. Therefore, be sure to set up alert tools, through email or by phone, that warn you of transactions that look suspicious.

You can protect your business against ACH debit fraud by setting up account alerts when your account activity warrants concern. Typically, this type of alert falls under the category of an unusual activity alert. You can also include alert tools that warn you about changes to the profile for your account.

There are a number of tools and measures you can use to prevent ACH fraud. Consider the following:

Using encryption software

Security questions should offer options that do not require the need to input personal information, such as a home address or a Social Security number. In addition, it helps to use encryption and biometric tools to ward off cybercriminals, especially thieves who use more sophisticated and advanced methods of accessing bank accounts. For instance, you can use encryption software that employs a codified passcode to provide banking and ACH fraud protection when it is used.

Adding biometric technology

Biometric technology allows you to use a physical human trait, such as face recognition or a fingerprint, to authenticate private data and authorize access to an account. You can use this ACH fraud prevention tool to reduce the risk of fraudulent activities in-house.

What the FBI recommends

automated clearing house fraud

The FBI recommends that ACH risk management includes the following activities:

  • Watching account balances closely on a regular periodic basis
  • Frequently reconciling bank accounts
  • Using strong passwords
  • Changing passwords regularly
  • Restricting the access to computers used for ACH transaction processing
  • Regularly updating antivirus software and firewalls

5. Keep tabs on the latest ACH risks

Automated clearing house fraud can take place in many ways. This is why it’s important to stay up-to-date with the latest security risks in the space. Below are some of the most common ways that ACH fraud can take place within your business dealings.

Common Ways ACH Fraud Occur

Common fraudulent activities help you clearly understand what ACH fraud is. Below are some common examples:

  1. A criminal snatches a banking customer’s information and creates an ACH file in the name of the originator. Doing so allows them to steal money in an account before the victim discovers the theft.
  2. A perpetrator gets hold of a customer’s information and establishes himself or herself as an automatic bill payment recipient.
  3. An employee of a bank or target company changes ACH files to steal funds.
  4. ACH payment fraud may also involve the switching of ACH funds back and forth between accounts at different banks. This is done so the thief can steal the funds during the delay. This activity is a variation of an activity called check kiting.
    Check kiting is a criminal process where a check is written from a bank account with insufficient funds. The activity relies on the fact that banks need several days to validate checks.
  5. ACH fraud may take the form of spear phishing as well. During this activity, an employee, who is authorized to perform ACH transfers, receives an email that directs them to an infected website. The perpetrator installs a keylogger, which is a type of software that captures authentication information. By taking this action, a criminal can impersonate an authorized ACH representative and remove the money directed for transfer.

ACH security tools and measures should be a part of your ACH risk assessment plan. To implement automatic clearing house fraud prevention methods, you need to keep up-to-date with ACH security trends and keep a close eye on your accounting records and activities. By taking the aforementioned measures and steps, you will enhance your credibility as a business and come out on top financially and professionally.