Why does your business need ACH fraud protection

With so much on the plates and minds of small business owners, preventing ACH fraud probably isn’t at the top of your to-do list. But as the number of online transactions skyrockets, so does criminal activity. Fortunately, when it comes to ACH fraud, there are simple steps you can take to protect your business.

What is ACH fraud?

Before we jump into those steps, let’s cover some foundational information. ACH stands for Automated Clearing House, a network that facilitates electronic fund transfers between banks and other financial organizations.

The only information a criminal needs in order to commit ACH fraud is your business checking account number and your bank routing number. By the time you realize what has happened, the fraudsters have often disappeared — leaving you to clean up the financial mess.

How to prevent ACH fraud

Fortunately, guarding against ACH fraud is easy. Here are four simple methods:

  • ACH freeze:

    An ACH fraud filter acts as a barrier against unauthorized withdrawals from your account. It allows you to block all incoming debits or designate a list of authorized debits and credits, while filtering out all others.
  • ACH fraud filter:

    An ACH fraud filter acts as a barrier against unauthorized withdrawals from your account. It allows you to block all incoming debits or designate a list of authorized debits and credits, while filtering out all others.
  • Authorized user list:

    As part of your ACH fraud filter, if you have transactions that will occur on a regular basis with a finite list of other parties, you can create an authorized user list.
  • One-time authorization:

    As its name implies, a one-time authorization gives you the option to allow a one-time payment to a specified company. The bank will verify the transaction, but won’t process any others.

Benefits of an ACH fraud prevention system

Setting up a fraud prevention system may be an investment of time, but it’s hard to overstate the payoff. There are a number of benefits to setting up an effective ACH fraud prevention system with your bank:

  • Having predetermined criteria for transactions can help prevent errors
  • Losses are minimized since you can prevent unauthorized transactions before they take place
  • Cash flow improves while security risks decrease
  • Besides the cash loss, preventing losses saves you the time and effort of dealing with the fallout of fraud

Additional fraud prevention measures

But don't stop there. You can also set up internal controls and best practices to prevent fraudulent behavior by your employees.

  • Never click a suspicious link. Phishing is on the rise, and fraudsters are getting more tactful all the time. If you receive an email or a social media message you aren’t expecting, do not click any links. For example, a fraudster could send a Facebook message asking you about a product review or an email claiming an invoice. According to the BBB, the most common phony invoice scams involve demanding payment for office supplies, website or domain hosting services, and directory listings.
  • Set up checks and balances. Create a “dual control” system with a multi-person approval process for transactions above a certain dollar threshold. That way, no one person is in control of the overall process.
  • Review who has access to your bank accounts and ACH systems. Limit access strictly to those who need it.
  • Manage your passwords. Use long passwords of 8-12 characters (the longer the better) that include upper and lowercase letters, special characters and numbers. Use a password manager such as LastPass or Passible to generate and store your passwords. You can also set reminders to change your password at least every three months.
  • Set and stick to your internal procedures. Don’t cut corners with simple passwords or putting one person in charge of accounts. And always make sure your operating system and anti-virus software are up to date.
  • Never send financial information or credentials via email. If you’re going to pay a person or business, use a secure, traceable method.
  • Next steps

    While it might feel like additional steps in an already busy day, an ACH fraud prevention system is critical in safeguarding a company from potential attacks. For more resources for businesses, visit the Nationwide Business Solutions Center.

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The information contained in this blog was obtained from sources believed to be reliable to help users address their own risk management and insurance needs. It does not and is not intended to provide legal advice. Nationwide, its affiliates and employees do not guarantee improved results based upon the information contained herein and assume no liability in connection with the information or the provided suggestions. The recommendations provided are general in nature; unique circumstances may not warrant or require implementation of some or all of the suggestions. Nothing in this brochure is intended to imply a grant of coverage.