Understanding and Combating ACH & Wire Fraud | Medius (2024)

FAQs

Is ACH wire fraud? ›

Fraud committed against company bank accounts usually occurs by writing unauthorized checks, through wire fraud, or through ACH fraud. ACH stands for Automated Clearing House, a nationwide electronic funds-transfer system which provides for fund-transfers between banks and other financial institutions.

Fraudulent transactions: ACH reversals can correct unauthorized or fraudulent transactions to protect the financial integrity and security of the involved parties.

Data to review can include timestamps, location information, IP address and more—anything that would provide evidence that the actual cardholder wasn't involved in completing the transaction. Additionally, ACH transactions have two “Trace IDs”—the destination and source IDs.

Ultimately, merchants and financial institutions that process the transactions are liable for ACH fraud.

How Do Banks Investigate Fraud? Bank staff will usually start with the transaction data and look for likely indicators of fraud. Time stamps, location data, IP addresses, and other elements can be used to prove whether or not the cardholder was involved in the transaction.

While banks are generally obligated to refund money lost to fraud, they may deny the refund if you were negligent or involved in the scam. Whether or not your bank will refund scammed money depends on the bank's policies, the type of scam, and how you paid.

How to Initiate a Dispute? The WSUD Process. If customers believe they have grounds for an ACH dispute, they can file a Written Statement of Unauthorized Debit (WSUD) with their bank. If you hold a corporate account, you must file the statement within 24 hours, whereas consumers have 60 days to file for the dispute.

Recurring ACH debit payments are able to be cancelled, but you must do so at least three business days before the payment is due. To cancel a recurring ACH payment, you'll need to first contact the company you're paying and inform them that you're revoking their access to your account.

Wire fraud is a federal crime that is investigated by the Federal Bureau of Investigation (FBI). Wire fraud occurs when someone uses wire, radio, or television communications to defraud others.

How to protect yourself against wire fraud? ›

Under federal law, the crime of Wire Fraud is a Class C felony, punishable by up to twenty years in prison, three years of supervised release, and $250,000 in fines. Additionally, complete restitution will be ordered and any property obtained from the proceeds of the offense will be confiscated.

An ACH fraud filter acts as a barrier against unauthorized withdrawals from your account. It allows you to block all incoming debits or designate a list of authorized debits and credits, while filtering out all others.

Senders can also reverse an ACH payment. This is typically known as a “stop payment.” The reasons a sender may wish to reverse a payment are generally the same as listed above–there's been an error. Other reasons for reversals include disputes between the sender and receiver.

Suspicious addresses supplied, such as a mail drop or prison, or phone numbers associated with pagers or answering service. Social Security number provided matching that submitted by another person opening an account or other customers. An address or phone number matching that supplied by a large number of applicants.

ACH payments are less expensive than wire transfers. ACH payments are generally more secure compared to wire transfers. Wire transfers can be sent internationally, whereas ACH is a U.S.-only network. ACH transactions are ideal for businesses that process payments in bulk.

Because the process of these transactions is partially automated, and because ACH fraud is fairly easy to commit, the risk of losing money is significant. It should be noted that the overall amount of ACH fraud is a small percentage of the total fraudulent transactions in the payment system environment.

ACH payments are regarded as a more secure fund transfer than wire transfers as no human involvement is required for ACH payments, unlike with wire transfers. Additionally, you can send and request payments via the ACH system while you can only send payments via a wire transfer.

If a fraudster knows your routing number they can easily tell which financial institution your funds are at, putting you at risk of phishing attempts. If a criminal has both your routing number and account number they can potentially steal money from your account through fraudulent ACH transfers and payments.