There are many types of fraud that affect businesses. One of the biggest concerns is Automated Clearing House (“ACH”) fraud. ACH is a system that enables the exchange of funds between businesses and individuals through the use of checks, wire transfers, and direct deposits. Criminals need only two pieces of information to commit ACH fraud: your business checking account number and your bank routing number. This means that anyone who has a check from your business may have all the information needed to steal money from your account through an ACH transfer, either by phone or online. Criminals are increasingly targeting small and mid-sized companies, because they often have less-sophisticated security systems than larger companies.
Many business owners assume the same rules of personal banking apply to commercial business accounts, but this is not the case. The law protecting electronic transfers apply only to personal bank accounts, not business accounts. For a personal account, the individual may have up to 60 days to report any fraud. In contrast, a commercial business has much less time to report cases of fraud. Many commercial claims must be reported within 24 hours. The burden is on the business owner to notify the bank immediately if there is a disputed transaction.
There are a number of precautions a business can take to minimize the risk of being a victim of ACH fraud. The upcoming issue of Premier Flooring Retailer includes an article on ACH fraud that lays out many of these safeguards. The bottom line, and best single precaution, is that every business should check its account every day to ensure there are no suspicious activities.
Notice: The information contained in this blog is abridged from legislation, court decisions, and administrative rulings and should not be construed as legal advice or opinion, and is not a substitute for the advice of counsel.
