One of the major themes in modern cybersecurity practice is thorough, comprehensive coverage that protects an organization’s entire attack surface. This requires network defense mechanisms for everything from ransomware attacks to social engineering scams, and even automated clearing house (ACH) payment scams.
Understanding how ACH payment scams work and how organizations can protect themselves against these types of schemes is critical for maintaining the health of your network.
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Join us below as we explore ACH payment scams in further depth, in addition to the cybersecurity protocols that can help fortify your network against these types of cyberattacks.
If you’d like to see how your current cybersecurity strategy measures up against industry standards and best practices, take a minute to review DOT Security’s Cybersecurity Checklist: How Covered Is Your Business?
What Is ACH Fraud?
ACH fraud involves unauthorized or deceptive activities conducted through the automated clearing house network, which facilitates electronic money transfers between banks in the United States. This network processes an array of transactions, including direct deposits and bill payments, making it an attractive target for cybercriminals seeking to exploit its vulnerabilities.
The ACH network is a critical component of the US financial system, handling billions of transactions each year. It allows for the seamless and efficient movement of funds between accounts, supporting a range of financial activities.
Common uses of the ACH network include payroll direct deposits, consumer bill payments, business-to-business payments, and government benefit distributions. Due to its widespread use and the large volume of money involved, the ACH network is an appealing target to threat actors.
Cybercriminals exploit the ACH network by using stolen or fraudulently obtained banking information to initiate unauthorized transactions. These illegal activities can disrupt the financial operations of individuals and businesses, leading to significant financial losses and operational headaches.
The ACH system's efficiency and speed, while beneficial for legitimate transactions, also work to the advantage of malicious actors, as unauthorized transactions can occur quickly and may be difficult to reverse once processed.
ACH fraud can cause direct financial loss, erode trust in electronic payment systems, and result in additional costs related to recovery efforts. Financial institutions and businesses must remain vigilant and implement robust security measures to detect and prevent fraudulent activities within the ACH network, protecting themselves and their customers from potential harm.
Types of ACH Fraud
ACH payment scams are particularly dangerous because of how quick the transactions can occur and how hard an approved payment is to reverse. To make matters worse, there are multiple forms an ACH payment scam can take–meaning individuals and organizations alike need to be ready to defend themselves from these schemes no matter how the attack is delivered.
Some of the most common ACH payment scams to look out for include:
- Phishing Scams
- Business Email Compromise (BEC) Attacks
- Vendor Impersonation
- Payroll Diversion
- Account Takeover
Keep reading to learn more about the various ACH payment scams and how organizations can fortify their network defenses and avoid falling victim to these scams altogether.
1. Phishing Scams
Phishing scams often involve threat actors sending emails or messages that appear to be from legitimate financial institutions or trusted entities. These messages typically contain links to fake websites that mimic the look of official sites, prompting victims to enter sensitive information, such as bank account numbers and login credentials.
Once this information is obtained, threat actors can initiate unauthorized ACH transactions, transferring funds from the victim's account to their own.
While email phishing is one of the most common forms of phishing, these attacks can also happen through SMS (smishing) or even an actual phone call (vishing). Hyper-targeted phishing also exists and is generally referred to as whale phishing.
Being able to recognize, report, and avoid phishing scams is vital in keeping both individuals and organizations safe.
2. Business Email Compromise (BEC)
In business email compromise (BEC) scams, cybercriminals gain access to or spoof a company's email account, in turn, using that account to send fraudulent payment requests.
These emails typically appear to come from a trusted source within the organization, such as a CEO or a vendor. The scammer instructs the recipient to change the bank account details for an upcoming payment or to make an urgent transfer to a new account, which is controlled by the threat actor.
If the request is thought to be legitimate, an employee will comply and unknowingly transfer funds to the criminal's account.
3. Vendor Impersonation
Vendor impersonation is similar to a BEC attack since it involves the malicious actor posing as legitimate vendors or suppliers.
They contact businesses and request changes to the bank account information on file, directing future payments to accounts they control. This type of scam often succeeds because the request appears to come from a trusted business partner, and without proper verification, the changes are made, leading to substantial financial losses.
Authenticating sensitive requests like this is a crucial step in fortifying defenses and preventing ACH scams.
4. Payroll Diversion
Payroll diversion scams target employees' payroll accounts.
A threat actor will make use of phishing or social engineering tactics to gain access to employees' payroll portals. Once inside, they change the direct deposit information, diverting paychecks to their own accounts.
While victims typically notice this level of fraud by the next pay cycle, it’s often too late for them to recoup any of the stolen funds. This makes payroll diversion scams particularly important to catch in advance of any adverse actions. One of the main goals of cybersecurity is to slow down threat actors. The slower they move, the easier they are to isolate and neutralize.
5. Account Takeover
In account takeover schemes, criminals use stolen personal information, such as social security numbers and banking credentials, to gain unauthorized access to a victim's bank account.
They then initiate ACH transfers, moving funds to accounts under their control. This type of fraud is particularly damaging because it can go undetected until significant sums have been siphoned off, making recovery difficult—and in some instances, nearly impossible.
Understanding these common ACH payment scams is crucial for businesses and individuals to protect themselves.
Defending Against ACH Payment Scams
Organizations and individuals can defend against ACH payment scams by implementing robust security measures and encouraging a culture of cyber awareness. One of the most effective defenses is the use of multi-factor authentication (MFA).
By requiring multiple forms of verification before granting access to sensitive information or authorizing transactions, MFA significantly reduces the likelihood of unauthorized access through stolen credentials. This additional layer of security ensures that accounts stay secure even if one authentication method is compromised.
Regular training and awareness programs are also crucial in defending against ACH payment scams. Organizations should educate employees about the common tactics used in phishing and social engineering attacks, emphasizing the importance of scrutinizing unsolicited requests for sensitive information or payment changes.
Employees should be able to recognize suspicious emails and verify any changes to payment instructions through direct, known communication channels, rather than relying on the information provided in potentially fraudulent messages.
Implementing stringent identity access procedures is another key defense strategy. Before processing any changes to vendor payment details or executing large or unusual transactions, organizations should establish protocols to independently confirm the legitimacy of the request. This might involve a secondary approval process with the requesting party using previously established contact information.
Additionally, continuous monitoring and alert systems can help detect and respond to suspicious activities promptly. Financial institutions and businesses should set up automated alerts for large transactions or unusual patterns of activity in their accounts. Regularly reviewing account statements and transaction histories can help identify and address unauthorized transactions quickly.
By combining these network safeguards with a proactive and informed approach, organizations and individuals can significantly reduce their risk of falling victim to ACH payment scams, protecting their financial assets and maintaining the integrity of their electronic transactions.
Wrapping Up on Avoiding ACH Fraud
No organization wants to fall victim to an ACH payment scam, but how many institutions are actually prepared to recognize, report, and avoid these schemes altogether?
By implementing a proactive and multi-layered cybersecurity strategy that includes aspects like MFA, identity access management, and employee training, you can better position your organization to avoid ACH payment scams in the first place while bolstering your resilience should a cyber incident occur.
Cybersecurity standards and best practices are always in flux as technology continues to advance. Review DOT Security’s Cybersecurity Checklist: How Covered Is Your Business? to get a better idea of where your cybersecurity strategy is currently and where you can take it tomorrow.
