Faster ACH Payments Making Fraud Protection Difficult

January 3, 2017, Written By Lynn Oldshue

While faster ACH payments are speeding up transactions for customers, it is making it more difficult for banks to fight fraud.

ACH (Automated Clearing House) payments are those where an entity or person is transferring money from their bank account to another organization or person using an automated clearinghouse. Payroll, direct deposit, vendor payments and person-to-person transfers are all examples of ACH payments.

In the past, banks had two to five days to analyze transactions, but since credit-based ACH payments are now settled within the same day, it is difficult for banks to review suspicious transactions. Since financial institutions are struggling to review transactions within the shortened time frame, fraudsters are using this as an opportunity to take advantage of the system.

“Recently we’ve seen more evidence of incidences of ACH fraud than we have in the past,” Andrew Davies, a VP at Fiserv, told American Banker. Davies also explained there has been an increase in the number of cases where malware impacted ACH files.

“A lot of their fraud filters will not necessarily have the wherewithal to break out all the transactions, look at history of the accounts on the incoming and outgoing side, look at the batches within the file and then look at the behavior associated with the overall file from an ACH perspective,” he said.

Not only is the threat of fraud greater, it is also more difficult to recover money stolen in this sort of fraud.

“Anytime you push money out, it’s really hard to pull it back,” Ruston Miles, founder and chief innovation officer of Bluefin Payment Systems, explained. “If it’s a payroll file, the money has been pushed out, and you can’t go out to the customer and pull it back.”



The information contained within this article was accurate as of January 3, 2017. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.