How Businesses Can Protect Against Check & ACH Payment Fraud
Paper checks and automated clearing house (“ACH”) payments remain ever-present in the commercial payment landscape. Unfortunately, “fraudsters” continue to infiltrate these forms of payment. The 2022 Payments and Fraud Control report, underwritten by JP Morgan, found that checks and ACH debits were the payment method types most affected by fraud activity (66% and 37%, respectively).
Check Payments and FraudOverall, levels are decreasing, but paper check payments remain the preferred payment method for businesses. Thus, check fraud remains the most prevalent form of payment fraud. This year, as we have all heard in the news, the old-fashioned mailbox has become a target. Thieves get their hands on mailed checks and either sell them on the black market or “wash” them by replacing the amounts and payees. However, there is good news. According to the Payments and Fraud Control report, the overall percentage of companies that reported being subjected to check fraud or attempted check fraud has decreased since its high in 2018.
We can attribute the reason for the decrease to:
2. More companies are implementing daily reconciliation processes.
3. Many companies shifting paper payments to ACH.
4. Decreasing checks as a percentage of commercial payments overall.
ACH Payments and Fraud
Over time, using fewer checks and implementing more fraud controls has helped to decrease the overall percentage of fraud committed using checks. This, however, has contributed to ACH as a percentage of overall payment fraud to be on the rise. Fraudsters realize that more and more companies are out in front of check fraud, but that ACH payments might still be vulnerable.
Tools to Combat ACH Fraud
Businesses that originate ACH payments are at risk of Business E-Mail Compromise (“BEC”) scams. In a BEC scam, criminals send an email message that appears to come from a known source making a legitimate request. Many times, scammers leave the e-mail itself untouched but change the banking information on the invoice attached to the e-mail. It looks very real and certainly not as obvious as in the past when misspelled words and poor grammar were used to direct originators to send funds.
Tips for Preventing and Combating Fraud
- Call the party requesting a payment to verify the instructions. Always use a phone number on file versus one provided in a request.
- Maintain current vendor information for anyone authorized to change payment instructions.
- Educate and train employees to recognize, question, and authenticate changes in payment instructions.
- Never confirm new bank information via email.
- Limit the number of employees authorized to initiate ACH transactions and use dual controls when originating. The more eyes on the transaction, the better.