A scenario becoming more common each year:
A business receives deposits of funds from a vendor via an ACH, or automated clearing house, deposit, so its bank account displays a healthy balance. A week later, it pays some large bills. The bank notifies the company there are insufficient funds. But how can that be? Upon investigation, the business discovers many ACH withdrawals - all for less than $10,000 - they didn’t authorize. After the FBI gets involved, they find the money has been moved to accounts overseas. The business has become a victim of ACH fraud. And, worst of all, the bank has no obligation to reimburse it.
Companies that have experienced ACH fraud range from small businesses to large corporations. The expanded use of Internet banking has hastened the growth of such fraud.
ACH debits are electronic withdrawals initiated through the automated clearing house. The most common are direct deposits of payroll, direct debit payments of bills, business-to-business payments, and payments of dues and memberships. They are a relatively simple way to move money, but they come with some risk.
Unlike checks and credit cards, the organization may not have recourse to recover the loss. Corporate accounts have only 24 hours to notify the bank if a fraudulent ACH transaction is detected.
How can you protect yourself? One of the first lines of defense is to maintain a separate bank account for ACH debits and credits. It is also important to monitor and reconcile balances and transactions daily. ACH debit blocks and ACH debit filters can assist in your monitoring. Your banker should be able to explain them. Cyber security insurance also is available for additional protection against loss.
To learn more about how SS&G can help your bottom line or to schedule a complimentary one-on-one consultation, please contact us at 877-772-6341 or Rx@SSandG.com.