How to Safeguard Your Business From ACH Fraud

How to Safeguard Your Business From ACH Fraud
How to Safeguard Your Business From ACH Fraud

Having your own business entails a lot of hard work. Besides running the business’s operational side, you also have to make sure that you’re protecting your business and data against theft and all kinds of fraud.

Regardless of the nature of your business, you’ll need to exchange funds with financial entities to process transactions and pay taxes. ACH refers to the Automated Clearing House, which allows you to transfer funds electronically with any second party, including your customers, suppliers, and any intermediaries in between.

The huge number of transactions processed through ACH every day made way for a proportional rise in the number of fraudulent ACH transactions. Especially that all it takes to hijack an ACH transaction is an account number,  so the increase in fraudulent activity is expected to grow even further. However, you can safeguard your businesses against theft and fraud by using the below strategies. 

Educate Your Employees

Your employees are the first in the defense line, so they need to be aware and trained on the implications of ACH fraudulent transactions and their role in protecting your business. Some simple practices they can adopt include: disposing of financial data efficiently and securely. Besides, they should learn about safe email exchanges, especially with external recipients. Budget for introductory and refresher training for new and old employees to learn how to spot and prevent fraudulent transactions.

Set up a Risk Verification Database

A risk verification database relies on machine learning to identify suspicious transactions from parties that aren’t included in the verified company database. This will considerably mitigate the risk of ACH fraud as per the information provided on this site discussing different tactics to safeguard your business.

However, it might take longer than you had planned for this solution to be effective as more organizations choose to contribute to this database’s growth. Furthermore, the associated costs, including hiring and training resources to manage this database, can be relatively high for small businesses to budget for. But when you factor in the thousands of dollars, you could be losing in fraud, and you’d definitely judge it to be a worthy investment.

Apply Stronger Authentication Requirements

In other words, you should add multiple authentication layers before authorizing any ingoing or outgoing payment transactions. First of all, dedicate a separate restricted network to process any payment gateways that you use. A one-time authentication password is a smart feature that you can add to your authentication process where digital or soft tokens are used to provide a one-time-only password per transaction.

Consider Reconciling your Accounts Daily

Delayed account reconciliation is one of the common mistakes that companies usually make and subjects them to fall prey to  ACH fraudsters. Daily reconciliation is essential if you want to be able to identify malicious attempts as soon as they happen. This will enable your staff to report the incident to the financial institutions that you work with, so they can act immediately to limit your losses.

Reconsider the Banks You’re Dealing With

When it comes to protection against payment fraud, not all banks are equal. By law, banks are not required to give business accounts the same diligence that they give consumer accounts. This leaves the protection process defective and unreliable. Take the time to go through the fraud protection policies that your banks follow and demand an update if/when possible. Otherwise, it’s in your best interest to cut ties with your current bank and look for ones that provide a more sophisticated level of security to reduce your risk of financial loss.

Don’t Write Checks

Checks are supposed to be a thing of the past in the corporate world. As much as possible, you should avoid writing reviews as you’d be handing over sensitive information about your business, including your name, address, and account details, to any potential fraudsters. If you can’t avoid checks altogether, you should use anti-fraud tools to safeguard your finances. However, whenever you can, switching to credit cards to settle your company expenses is a more effective method since credit cards are generally more secure than checks.

Closely Monitor Authorized Employees

Employees who have access to your payment credentials should be closely monitored, especially if they are newcomers. During the hiring process, make sure you run a thorough background check on those who’ll be filling such critical positions. If you don’t have the means to run a background check, find a specialized company that can take over this vital task and provides you with all the information you need. Once they are hired, continue to monitor your employees and make sure you update your bank whenever an authorized signer leaves your company to avoid falling victim to any fraudulent schemes.

According to statistics, ACH frauds are expected to increase, given the growing number of ACH transactions that take place daily further. Study the above tactics and share your concerns with your employees to understand the magnitude of ACH fraud. You should also involve your bank and ask for a revised agreement that can help you safeguard your business against ACH frauds.

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