Automated Clearing House (ACH) debits and credits fraud accounted for 34% and 19% of payment fraud in 2020, respectively. As these transactions are typically considered more difficult to compromise, the increase in ACH fraud (debits were up 1% from 2019) suggests a more sophisticated approach. Fraudsters may compromise the processes leading up to payment initiation or recruit assistance from inside targeted businesses. A combination of these two approaches was used to originate fraud in the next scenario.
The scheme: An employee of a tile retailer with access to ACH transactions received an email from a fraudster impersonating a contract partner. The email urged the employee to update the company’s business contracts by downloading an attachment. The employee clicked on the attachment, but was directed to an infected site, which installed a keylogger that enabled the fraudster to gain access to authentication information. Armed with the company’s checking account number and a bank routing number, the fraudster was able to impersonate the company’s authorized representative and withdraw funds.
The aftermath: Because businesses get as a little as one day to report fraud to their bank, detection is critical in ACH fraud. While it only took the fraudster 30 minutes to withdraw funds, the employee didn’t realize the loss or connect the dots to a fraudulent event for several days. With the tile company liable for costs, the business suffered a severe blow to its revenue, losing nearly $150,000.
The way forward: Troubled by the lack of red flags being raised during the fraud event, the tile company investigated various solutions designed to protect it from future losses, including ACH Blocks and Filters. This service systematically blocks all incoming ACH transactions or automatically returns any transactions that are not from pre-authorized companies. In addition, the company implemented ACH Positive Pay, enabling the payables team to review all daily exceptions to their pre-authorized ACH debits and credits rules and to make a pay or return decision on them.
With $40 billion in assets, Texas Capital Bank is a trusted financial institution focused on serving businesses and entrepreneurs. In addition to offering guidance from experienced fraud personnel, Texas Capital Bank, N.A. offers a wide variety of treasury solutions designed to minimize the risks of fraud and protect clients’ accounts in the case of a fraud event, including ACH positive pay, check positive pay, wire transfer email notifications and more. Member FDIC.