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ACH Fraud: Awareness, Prevention, and Solutions

ach fraud

Transitioning to digitized payment processes? Learn what you need to know about ACH fraud and how to prevent it.

Automated clearing house (ACH) transactions make payment processing easier than ever before. An entirely digital, nearly instantaneous transfer system, the ACH network has become popular for all sorts of business transactions, including payroll, direct deposit, and consumer billing. It makes online payments easier, more seamless, and more secure. However, despite the ACH network’s many positive features, it also stands at risk of digital fraud attempts.

The U.S. Federal Trade Commission received over 2.1 million reports of fraud in 2020 alone, the most common being digital imposter scams. Organizations of all sizes and across all industries are susceptible to such attacks. Therefore, awareness of how such attacks function and how to prevent them is crucial.

While ACH fraud is rare, it can still happen if your organization does not have the necessary security protocols in place—and when it does happen, the damages are felt severely. Knowing how to identify potential ACH fraud is key to mitigating risk. This will also help you protect your company’s data and resources.

ach payments automated clearing house
Source: Shutterstock

How to Identify Possible ACH Fraud

The ACH system is almost totally automated, which makes it difficult to defraud. However, ACH fraud can still occur when unauthorized third parties facilitate a transaction, or when authorized actors voluntarily give information to external parties. There is no perfect security system, and cybercriminals commit ACH fraud by exploiting vulnerabilities. Two of the most common methods for ACH fraud are phishing emails and ACH check kiting.

A phishing email is a type of cyberattack that masquerades as an email from legitimate organizations. These scam emails typically include an undefined link in the email body—when the recipient clicks on it, the email directs them to another site that steals their data. Phishing emails are easy to send en masse to an entire organization, so it is crucial that your staff are well-aware of the best practices in email safety.

ACH check kiting, another popular fraud strategy occurs when someone issues a check without the funds to cover it. Since checks take some time to clear, perpetrators can use this window to withdraw funds before the bank realizes that there is an issue.

These particular instances of ACH fraud are among the easiest to spot, but there are more subtle strategies to watch for. Some other methods for carrying out ACH fraud include insider threats (when an authorized individual gives credentials to unauthorized parties to access sensitive information) and ACH lapping (when a payment is diverted but marked as successful anyway).

Awareness of ACH fraud methods is key to prevention. After all, you can’t prevent fraud if you don't know what it looks like! It’s also critical for your organization to implement robust security protocols to keep your data well-protected.

Set Up ACH Blocks and Filters

The best way to prevent ACH fraud is to keep tight control of your transactions. Implementing blocks and filters allow you to manage your payments effectively and efficiently, so no transaction goes through without your authorization. Pairing with a third-party processor who already operates in this manner can save you the stress of managing all your payments yourself.

For example, NatPay’s Direct Deposit Plus ACH Solutions boosts your transactions’ safety with constant NACHA compliance, so you can be sure your payments are always as secure as possible. Automated alerts for every transaction allow you to keep informed without scouring for fraud yourself. These protective measures give your organization an extra layer of security, so all your transactions flow smoothly and seamlessly.

ach fraud
Source: Pexels

Utilize Two-Factor Authentication Security to Prevent ACH Fraud

Two-factor authentication (2FA) is another security measure that can protect your organization from ACH fraud. Often implemented for email and social media accounts and other repositories of personal information, 2FA neutralizes the threat of hacking by decentralizing the access point.

As the name implies, 2FA requires confirmation from two different sources before a user can access an account. Consider, for example, how many social media accounts will require a password, and then text an authentication PIN to your mobile phone. This two-pronged verification strategy makes fraud less likely. It’s much more difficult for a hacker to access two independent devices at exactly the same time. If your main password is compromised, the backup authentication keeps your data protected.

It is worth noting, however, that two-factor authentication scams can still happen. It is critical that users remember to never share their authentication codes with other individuals.

ACH Payments Offer Maximum Security—Use NatPay Solutions Today

Compared to traditional modes of payment like checks and cash, ACH transactions present the next level of payment security. Especially in this post-Covid hyper-digital age, it helps to implement as many robust electronic options as possible. The fully-digitized ACH model limits the possibility of human error and the enhanced security scales back on fraud possibilities.

While ACH fraud is rare compared to more traditional payment methods, it can still strike. Keeping aware of different ACH fraud strategies and how to combat them—and educating your staff as well—are key to keeping your organization secure. Ensure that your ACH filters and blocks are up and running, and set authorization protocols at both individual and company levels for maximum security. Better yet, partner with a third-party payment processor who keeps on top of these concerns already, like NatPay.

A leader in secure payment processing since 1991, NatPay’s payment solutions are sure to keep your information safe. From ACH payment processing, to secure document delivery and invoicing, NatPay can simplify and safeguard all your business financial transactions.

Incorporate NatPay Secure Solutions into your organization to protect your business from cyberattacks and fraud: reach out today!

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