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What is ACH fraud and how can I prevent it?

GoCardless
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Last editedNov 20222 min read

Many financial institutions, particularly those based in the United States, use the ACH (Automated Clearing House) network to handle their payments and transfers, so most of us have made an ACH transaction at some point, whether we’re aware of it or not. However, while the ACH was once seen as a perfectly secure network, there has been a significant rise in fraud losses in recent years, with criminals using the network to scam individuals and businesses out of their money.

Why is ACH fraud on the rise?

As payments tend to linger in the ACH network while awaiting clearance, criminals have an opportunity to syphon off those funds while they are being checked. This can be done by using information fraudsters have stolen through various nefarious means, such as phishing emails or malware viruses.

To gain access to your account, the criminals only need a routing number (or sort code) and account number, and once that money has been stolen, the victim is often left on the hook with the bank for the stolen amount.

It’s a serious problem and, even worse, it’s thought that many people who have fallen victim to ACH fraud simply fail to report it out of embarrassment. But to ensure you never get caught up in such a scam, we take you through how ACH fraud works and how best to prevent and protect yourself from it.

ACH fraud detection

There are several types of ACH fraud to look out for.

  • Criminals steal a customer’s data, use it to generate an ACH file and withdraw funds or set themselves up as automatic bill pay recipients.

  • Somebody inside the company or bank modifies ACH files.

  • Funds are juggled between accounts with the criminals taking advantage of the time-lag in transactions to strike.

  • A phishing scam such as the criminals impersonating your bank is used to lure customers to a site that steals their information.

The best way to detect this kind of fraud is to keep an eye out for inconsistencies in your account balances. You should also be wary of all messages you receive from your bank that ask you directly to provide your account information. If they were really your bank, wouldn’t they have it already?

ACH fraud prevention

Financial institutions should prevent ACH fraud by first identifying who is most at risk. Presently, individuals and SMEs tend to be more at risk as they have fewer cybersecurity measures in place for the criminals to negotiate around. Those on lower incomes and those who regularly apply for loans and credit cards are also at risk. These kinds of account holders should be educated about the dangers of ACH fraud.

Immediately notify all account holders if there is any suspicious activity on your account. Use multi factor authentication at all times. Also be aware of common ACH scams currently doing the rounds so you can warn account holders about these scams.

ACH fraud protection

Use strong passwords with multi factor authentication where possible and change your passwords often. The use of firewalls and antivirus software is also highly recommended. If you are a UK business wishing to collect payment from US customers, use a payment platform that is familiar with ACH.

GoCardless is an easy to set up solution that provides a secure and reliable solution so UK businesses can collect ACH payments directly from a US bank account in dollars and settle payments in pounds without requiring a US bank account. This all happens at the real-time currency conversion rate.

We can help

GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments

Over 70,000 businesses use GoCardless to get paid on time. Learn more about how you can improve payment processing at your business today.

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Interested in automating the way you get paid? GoCardless can help
Interested in automating the way you get paid? GoCardless can help

Interested in automating the way you get paid? GoCardless can help

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