Automated Clearing House, better known as ACH, offers an electronic way for consumers and businesses to make payments quickly and easily for goods and services. ACH uses bank routing and account numbers to move money between parties. Have you considered the risks associated with sharing such sensitive account details?
According to Nacha, the governing body over ACH, the number of ACH transactions increased to 6.6B in 2023. It is arguable that an increase in the number of transactions also leads to an increase in fraud cases against them.
The Association for Financial Professionals published a report stating that out of surveyed businesses, 37% of had been targets of ACH fraud.
Accounts payable (AP) teams are no strangers to fraud. Because they often rely on paper checks to pay their vendors and suppliers, they have become sitting ducks for fraudsters. However, even as AP clerks start replacing paper checks with digital payment methods such as ACH, they still have a target on their backs.
Our blog will specifically explore the different types of ACH fraud and the tools you can use to protect your business against them.
There are many tactics that fraudsters use to attack ACH transactions.
Fraudsters and cybercriminals find ACH transactions to be attractive targets for many reasons.
In the previous section, we alluded that ACH funds can take several days to settle, often 1-3 business days. Because ACH does not offer realtime verification, payments and transfers can be made without sufficient funds available.
ACH transactions are extremely complicated. The end-to-end lifecycle of these transactions involves numerous parties: processors, ODFIs, RDFIs, originators, and receivers. Multiple touchpoints can increase vulnerabilities, opening the door for attacks.
Additionally, the window for businesses to request a return on an ACH is very small; only 24 hours. Bad actors can slip away before the ACH clears and the business can react.
Stopping ACH fraud requires due diligence and awareness throughout the entire transaction lifecycle and across your entire organization. Some payment processors can help.
Nacha requires payment processors to validate any web-initiated ACH transactions to protect against new threats within the ACH network. ACH validation looks at the following, with processors declining a transaction if any of these are true.
Nacha’s ACH validation rules aim to stop fraudulent ACH transactions before they happen and:
There are more measures businesses should utilize!
As previously mentioned, businesses have only 24 hours to report instances of ACH fraud to their financial institution, whereas consumers have 60 days.
ACH fraud responsibility falls on the business after this 24-hour window has closed.
Not every business has the resources or expertise to stop or mitigate payment fraud. Additionally, ACH validation can be expensive and technologically challenging.
REPAY’s vendor payment automation platform includes ACH validation at no additional cost. And ACH fraud isn’t all we protect against. Let’s schedule a call to discuss our no-cost, robust payment protection toolkit! We take on vendor payment security, so you don’t have to.