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Finance glossary

What is ACH fraud prevention and how to protect yourself

Bristol James
4 Min

The Automated Clearing House (ACH) Network is a common channel for people and businesses in the US to make electronic payments. ACH fraud is committed when scammers take advantage of the ACH process by stealing money or sending fraudulent ACH transfers. The practices and technologies used to prevent ACH fraud all play an important role in ACH fraud prevention.

Preventing ACH fraud is crucial because once a transaction has been made, it’s very difficult to ever recover the stolen funds. ACH fraud prevention should be part of every business’s security strategy, but it should also be top of mind for individuals who could fall victim to ACH scams.

How to Prevent Fraudulent ACH Transactions

Preventing unauthorized ACH payments is possible when organizations are prepared to do its due diligence and employ the proper tools. Methods businesses attempt to prevent ACH fraud include:

ACH Fraud Filter

Sometimes referred to as ACH positive pay, help prevent fraudulent transactions by screening ACH payments against predetermined criteria to flag suspicious activity.

ACH Freeze

Similar to an ACH debit block, this essentially freezes or blocks ACH transactions temporarily, unauthorized users will be denied the access needed to make unauthorized ACH payments.

Authorized User List

Authorized user lists limit ACH transactions to approved individuals or entities, reducing the risk of unauthorized parties initiating fraudulent transfers.

One-Time Authorization

One-time authorizations require unique and time-limited codes or tokens for ACH transactions, enhancing security by ensuring each transaction is explicitly approved and reducing the risk of fraudulent activities.

Third-party security

Although banks offer several of the options listed above, businesses have learned it’s important to add an additional line of defense when it comes to ACH transfers. Adding an accounts payable technology to an organizations tech stack helps finance leaders and their teams to feel protected while also providing efficiencies in the accounts payable process.

Today, cyber security threats and attempts at ACH fraud have become significantly more refined. In order for organizations to rely on the above methods, it requires diligent bookkeeping and recordkeeping to ensure account numbers are always up-to-date and time spent fact-checking in the background. If a criminal or an internal employee has access to access your system, they may be able to update your vendor details, particularly the account details, rerouting payment to the wrong account.

That’s why thousands of companies across Australia, New Zealand and the US have opted for a final line of defense. Eftsure removes the stress from bookkeeping, fact checking, and protects businesses against the most dangerous threats, including cybercrime.

The Benefits of ACH Fraud Prevention

Invest in proper ACH fraud prevention, because the monthly costs of safety are significantly less than $320B reported losses for businesses in the US last year. Here’s some other key benefits of ACH fraud detection and prevention platforms:

Risk Reduction

ACH fraud prevention tools help mitigate the risk of financial losses by identifying and blocking potentially fraudulent transactions before they occur, safeguarding both businesses and consumers.

Cost Savings

When fraudulent ACH payments are successful, there are usually major financial losses involved for the victims. Not only can businesses feel confident carrying out every-day-business, there’s less time spent with employees trying to manage fraud recovery while continuing to pay suppliers.

Customer Trust

Reputational damage is a huge topic of conversation when it comes to cyber threats. With the right fraud protections in place, customers will feel secure when they do business with your organization.

Proactive Measures to Prevent ACH Payment Fraud

ACH debit fraud prevention isn’t solely reliant on advanced tools and SaaS solutions; it’s important that the humans behind the screen employ the following best practices to help prevent ACH scams:

  • Maintain strong and secure passwords that cannot be easily uncovered.
  • Participate in cybersecurity education courses to boost awareness of how fraud happens and feel empowered to prevent it.
  • Always verify information, including account numbers, routing numbers and names for accuracy.
  • Prioritize strong internal controls such as a segregation of duties and payment approval hierarchies for all electronic funds transfers.
  • Invest in additional lines of defense to save money in the long-run.
  • Monitor your transactions regularly to catch any potential discrepancies or suspect transactions.

Summary

  • Robust ACH fraud prevention strategies are vital because ACH fraud can result in extreme financial losses and is notorious for being tough to fix once it has taken place.
  • Key methods for preventing fraudulent ACH transactions include implementing ACH fraud filters, temporarily freezing ACH transactions, maintaining authorized user lists, and employing one-time authorizations for added security.
  • ACH fraud detection tools are only half the battle; individuals must also play their part in prevention with strong passwords, a dedication to learning about fraud in their industry, and a commitment to internal controls within their organization.

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