What Is ACH Fraud? How to Spot and Report It

The Automated Clearing House (ACH) network serves as a central hub for electronic funds transfers between financial institutions across the United States. This system facilitates a wide range of common financial activities, including direct deposit of paychecks, automatic bill payments, and transfers between bank accounts. Understanding the ACH network is important for financial security. ACH fraud involves unauthorized or illegally obtained transactions conducted through this widespread electronic network. This misconduct affects individuals and businesses, requiring awareness.

Understanding ACH Fraud

The ACH network processes electronic credit and debit transfers efficiently and at low cost. It is a system designed to handle batches of payments, making it suitable for recurring transactions like payroll and utility bills, as well as one-time payments. Fraud arises when unauthorized access or manipulation of these transactions occurs, leading to the illicit movement of funds.

Fraudsters involved in ACH schemes often include external cybercriminals who exploit digital vulnerabilities, as well as insider threats who leverage their access within an organization. Business email compromise (BEC) actors are also prominent, impersonating trusted entities to initiate fraudulent transfers. These malicious actors target a broad spectrum of entities, seeking to divert funds or obtain sensitive financial information.

Common Schemes in ACH Fraud

Fraudsters exploit the ACH network using social engineering and technical vulnerabilities. One prevalent method is Business Email Compromise (BEC), where criminals impersonate executives, vendors, or other trusted parties through email. They may trick employees into changing legitimate banking details for payments or into initiating unauthorized ACH transfers to accounts controlled by the fraudsters.

Account takeover is another frequent scheme, where fraudsters gain unauthorized access to a victim’s online banking credentials. This access allows them to directly initiate fraudulent ACH transfers from the compromised account to their own, often before the account holder notices the activity. Payroll diversion scams specifically target employees, with fraudsters redirecting direct deposit payroll funds to accounts they control, typically by altering banking information within a company’s payroll system.

Vendor impersonation involves fraudsters posing as legitimate suppliers to trick businesses into updating payment information. They instruct companies to change the bank account details for ACH payments, leading to future payments being sent to the fraudster’s account instead of the actual vendor. Phishing attacks and malware are instrumental in many of these schemes. Phishing emails or malicious software can be used to steal login credentials or install programs that facilitate unauthorized access to bank accounts and the initiation of fraudulent ACH transactions.

Recognizing Signs of ACH Fraud

Identifying potential ACH fraud allows timely intervention. A primary sign is the appearance of unexpected or unauthorized transactions on bank statements or online banking records. These could be debits for services not rendered or credits from unknown sources that may later be reversed. Unusual requests for banking information, particularly those received via email, text message, or other unsecured communication channels, should prompt caution. Legitimate financial institutions do not request sensitive details this way.

Discrepancies in expected payments or receipts can also signal fraudulent activity. For example, a business might notice that an expected payment from a customer has not arrived, or a vendor might report not receiving funds that were supposedly disbursed. Sudden changes in vendor or employee banking details, especially without prior direct verification through established secure channels, are a red flag. Fraudsters often attempt to intercept communications to alter these details and reroute payments.

Emails containing suspicious links or attachments, or those from sender addresses that appear slightly off, are common tools used to facilitate ACH fraud. These often attempt to trick recipients into revealing credentials or downloading malware. Receiving alerts about login attempts from unfamiliar locations or difficulty accessing online banking accounts can indicate unauthorized access.

Actions After Suspecting ACH Fraud

Upon suspecting or confirming ACH fraud, immediately contact your financial institution. Promptly notify your bank about the suspicious activity, providing all available details such as transaction dates, amounts, and any known recipient information. Acting quickly is important, as financial institutions often have specific timeframes, such as a 60-day window for individuals to report unauthorized debits, to initiate recovery processes.

Report the fraud to relevant authorities. File a complaint with the FBI’s Internet Crime Complaint Center (IC3), which tracks cybercrimes and assists investigations. Contacting local law enforcement can lead to a police report, which may be beneficial for insurance claims or further financial disputes.

Preserve all relevant evidence after fraud. This includes suspicious emails, transaction records, communication logs, and any other documentation related to the fraudulent activity. Such evidence can support investigations by your bank and law enforcement. Following these initial actions, regularly monitor your bank accounts and credit reports for any further unauthorized activity or attempts to open new accounts in your name.