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For Your Small Business Kevin Ocasio January 27, 2023

How to Prevent ACH Fraud

Are your company business accounts susceptible to ACH and wire fraud? If you're not sure, now is the time to find out. By educating yourself on this type of fraud and implementing preventative measures, you can help protect your business from losing money. This article will outline some tips for ACH fraud protection and prevention, so keep reading to learn more.

What Is ACH Fraud?

ACH fraud refers to the unauthorized use of electronic funds transfer by banks and other financial institutions via the ACH network. This can include instances where an individual's account information is stolen and used to make a fraudulent ACH transaction, or when a scammer tricks a business into sending payments to the wrong account.

Wire fraud, on the other hand, refers to the illegal use of wire communications for financial gain. Both ACH and wire fraud can result in significant financial losses for individuals and businesses. It's a good idea to be aware of these scams as your first step to fraud protection.

How Do ACH and Payment Fraud Happen?

ACH and payment fraud can occur when unauthorized individuals gain access to personal information, such as bank accounts or routing numbers, to conduct fraudulent transactions through the ACH network.

These criminals may use phishing scams, data breaches, or other methods to obtain this sensitive information. It is important for individuals and businesses to protect their information and closely monitor their accounts for ACH payments fraud prevention.

Who Is at Risk for ACH Fraud?

Business email compromise (BEC) scams target all companies that conduct ACH transfers, regardless of size or industry. These scams often involve fraudulent emails impersonating a company executive or vendor requesting an urgent transfer of funds.

However, smaller businesses may be more susceptible to these attacks due to a lack of proper security measures and training on detecting fraudulent activity. It is important for all businesses to stay vigilant and implement proper security protocols for ACH fraud prevention.

How to Prevent Fraudulent ACH Transactions

In order to prevent fraudulent ACH transactions, it is important for businesses to be aware of the signs of fraud and take precautions to protect their bank account. Here are 11 tips to help keep your business transactions safe and secure.

1. Use a secure payment gateway

Using a secure payment gateway is one of the best ways to prevent ACH fraud. A secure payment gateway will encrypt your customer's information and protect it from being accessed by unauthorized individuals.

2. Anti-virus and malware software

Protect your computer with anti-virus and malware software to prevent malware from infecting your system and stealing your customer's information. And make sure to keep your software up-to-date!

3. Be smart when creating passwords

Create strong passwords and don't use the same password for multiple accounts. Avoid using easily guessed words like your name or birthday, and include a mix of letters, numbers, and special characters.

4. Make sure websites are secure

Only enter your credit card information on encrypted websites that start with "https://". You can also check for a padlock icon in your browser's address bar, which indicates that the site is secure. If the site starts with "http://" or you don't see a padlock icon, do not enter your credit card information.

5. Keep your firewall turned on

A firewall helps protect your computer from hackers who might try to gain access to your system to steal your information. Always keep your firewall turned on and up-to-date. Financial institutions typically have their own fraud prevention measures in place, but it's always good to have an extra layer of protection.

6. Monitor your bank account regularly

Monitoring your bank account regularly for unauthorized transactions is one of the best ways to prevent ACH fraud. Set up account alerts so you can be notified immediately if there is any suspicious activity. If you do see a fraudulent transaction, report it to your bank immediately.

7. Educate your employees

Educating your employees about safe online practices and ACH fraud is one of the best ways to prevent it. Make sure your employees know how to spot the signs of fraud and what to do if they suspect someone is trying to scam them.

8. Verify requests for payment

If you receive a request for payment, make sure to verify the request before sending any money. Verify the requestor's identity and make sure you understand the purpose of the payment. If you have any doubts, contact the requestor directly to confirm.

9. Don't click on links in suspicious emails

If you receive an email from a sender you don't know, or if the email looks suspicious, don't click on any links. These links could be malicious and lead you to a website that will steal your information.

10. Don't trust a sense of urgency

Scammers often try to create a sense of urgency in order to get you to act quickly. Don't let yourself be pressured into making a decision and take the time to verify any requests for payment.

11. Know your rights

It's important to know your rights in case you do become a victim of ACH fraud. The Federal Trade Commission has information on what to do if you're a victim of identity theft, and the Consumer Financial Protection Bureau has information on your rights as a consumer.

Who Is Liable for Automated Clearing House Fraud?

The party responsible for ACH fraud is typically the bank which the fraudulent transaction originated from. However, if it can be proven that the account holder was negligent in protecting their account information and passwords, they may also be held liable. It is important for both individuals and businesses to regularly monitor their bank accounts and report any suspicious activity immediately to their financial institution.

How Do Financial Institutions Investigate ACH Fraud?

If someone were to commit fraud, financial institutions would investigate by closely monitoring account activity for unusual or suspicious behavior. They may also utilize fraud detection software to flag potentially fraudulent transactions. In cases of suspected fraud, the institution will conduct a thorough investigation and may even contact law enforcement if necessary.

Click HERE to learn how Old National Bank can help reduce your risk of fraud. 

This article was written by Kevin Ocasio from Small Business Trends and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to legal@industrydive.com.

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