Number of ACH Fraud Incidents Continue to Climb

Jul 10, 2019

ACH credit fraud has steadily climbed since 2016, according to the most recent annual fraud report from the Association for Financial Professionals (AFP).

In both 2015 and 2016, the number of cases of ACH credit fraud was at 11%. In 2017, the number rose to 13%. Last year, the number climbed to a whopping 20%, according to the survey, which garnered responses from more than 400 AFP members and approximately 200 prospective members. The AFP is a trade group for financial managers that work in many different industries.

The numbers also rose for the incidents of ACH debit fraud. Of those who participated in the survey, 33% said they were victims of attempted or actual ACH debit fraud in 2018. That percentage climbed 5% from 2017.

Since ACH transaction have become so common, more organizations are getting hit with attempted and actual fraud. Overall, the total number of ACH fraud for debit and credit transactions climbed from 78% in 2017 to 82% in 2018.

Possible Reason for the Fraud Hike

Experts predicted cases of fraud may climb as payments got faster. In September 2016, the ACH network unveiled same-day clearing for credits, and then, in 2017, introduced same-day clearing for debits.

With the introduction of same-day ACH with faster payments, organizations had smaller windows to catch fraud. When things move faster, risk always increases.

However, overall, the incidents of fraud are still smaller than they are for other payment types, so it is difficult to surmise that is the cause. Most likely, the increase is due to the overall popularity of ACH transactions.

How to Avoid Becoming a victim of ACH Fraud

Fraud schemes continue to grow, evolve, and target responsible, legal organization. Many of the scams involve social engineering, as well as intrusion techniques. When it comes to ACH fraud, it really has nothing to do with the network. Instead, weak input points are what make organizations vulnerable.

According to the NACHA, The Electronic Payments Association and the organization responsible for the ACH Network, the three most common types of fraud are:

  • Vendor impersonation fraud
  • Business email compromise
  • Payroll impersonation fraud

Business email compromise is when a business’ email accounts or compromised or impersonated and use request a payment. In many cases, the a cybercriminal infiltrates one of the employee’s email, monitor the accounts for patterns, contacts, and data, and then requests a payment from someone.

By implementing strong internal controls, organizations can prevent themselves from becoming victims of fraud. Some of the steps that can be taken include robust employee education and training sessions, as well as requiring authentication to make a payment or change any payment information.

Vendor impersonation fraud occurs when a business or government entity receives an unsolicited request, purportedly from a valid contractor. The request may be to update payment information, like new routing and account information for ACH or wire payments, or a request to change the payment method from check to ACH.

Organizations can safeguard themselves by educating employees, reviewing accounts often, and initiate payments using dual controls.

Payroll fraud occurs when cybercriminal direct individual employees to update or confirm their payroll information via a fake platform that spoofs their employer’s system. Oftentimes, fraudsters ask employees to do this by viewing a confidential email from human resources or the payroll department. When the changes are made, the fraudster changes the payment information.

To combat this, organizations should inform their employees about phishing schemes and keep them abreast of what would occur if they did need to change payment information. Self-service payroll platforms also should require authentication.

In Conclusion

Though ACH fraud has increased, this payment method is a pretty safe way option. Implementing some of the strategies unless can help better protect organizations, employees, and customers.

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Merchants in need of ACH processing should contact EMB works to provide solutions for all payment needs. Its online application is simple and quick.

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