Preventing ACH Payment Fraud

The Automated Clearing House (ACH) network facilitates money transfers from one bank account to another. ACH fraud occurs when funds are stolen through the ACH network.

Criminals are able to carry out this kind of theft when they have access to two pieces of information: a bank account number and a bank routing number. Armed with this information, they can fraudulently send lump sums, make recurring payments, or issue unauthorized payments for goods and services. According to J.P. Morgan, ACH payment fraud has increased by 10% since 2021, making it a growing priority for risk-averse businesses.¹

ACH fraud can be damaging to cash flow, especially on small businesses with tight margins. Unfortunately, these are the very businesses that may lack the resources or technological capability to combat fraud. This is why it’s essential for small business owners to understand what are ACH payments and how ACH payments work. Using this information – and with the support of PayPal – the threat and impact of ACH payment fraud can be mitigated.

Common types of ACH payment fraud include:

• Data breaches, whereby criminal organizations gain access to sensitive information
• Insider threats, from people within the organization
• ACH check fraud, such as kiting frauds
• ACH debit card fraud
• Spear phishing scams

Understanding the risks of ACH fraud

There are significant consequences to ACH payment fraud, especially for small businesses that may not have the means to implement large-scale fraud-detection measures. Any loss of revenue due to fraudulent payments can be harmful, as can the damage to a business’s reputation following a data breach. That’s why recognizing warning signs and suspicious activity is so important – and why your business needs to be aligned with a provider of ACH protection, such as PayPal Seller Protection. (limits apply)

ACH fraud prevention best practices

There are several best practice fraud prevention measures small businesses can put in place to help reduce the risks of a fraudulent ACH transfer. These include:

• Implementing multi-factor authentication for transactions

• Using secure payment gateways and encryption protocols

• Educating employees on ACH fraud awareness

ACH payment security measures

Measures to protect against ACH payment scams include:

• Verifying customer identities and bank account details
• Setting transaction limits and thresholds
• Monitoring and analyzing ACH transactions

There are several ways to reduce vulnerabilities in ACH transactions, including:

• Securing network infrastructure and devices
• Regularly updating software and security patches
• Conducting periodic risk assessments and audits

Employee training and awareness

It’s essential that business owners and staff are well trained in recognizing the signs of fraudulent activity and well placed to detect phishing scams. This involves:

• Helping staff to learn about phishing and social engineering threats
• Establishing protocols for reporting suspicious activities

Fraud detection and response

To properly implement these best practices, it is necessary to develop a system of fraud detection and response. This should include:

• Deploying real-time transaction monitoring systems
• Developing a response plan for suspected ACH fraud incidents
• Collaborating with financial institutions, such as PayPal, to resolve issues

Staying informed about ACH fraud trends

Fraudsters and their methods are constantly evolving and developing. To avoid being caught out:

• Keep up to date with the latest fraud schemes and tactics
• Utilize industry resources and news to stay informed

It’s vital for small business owners to understand the potential impact of ACH fraud and the importance of effective prevention. When it comes to fraud, it’s always better to be proactive rather than reactive. Fraudsters are becoming more sophisticated, and fraud represents one of the greatest ongoing threats to any small business. Stay one step ahead by prioritizing ACH payment security with the help of PayPal’s fraud detection technology.