Tactical Treasury: Fraud prevention is a never-ending task

February 15, 2022

With Nacha rule changes implemented in early 2021, along with new treasury solutions that are advancing and adapting to a world with more ACH transactions, understand how to follow them to mitigate fraud.


Industries, individual companies and consumers often react to unpredictable events by finding new ways of working, spending, and – especially for fraudsters – earning. At the same time, the substantial increase in ACH payments volume recently  indicates that a proactive approach to uncertainty -- optimizing treasury with paperless payments, for example – might not only minimize business disruption, but significantly reduce the risk of fraud and potentially high costs of returns and exceptions. 

For most companies, however, preparation is a matter of internal decision-making and strategy. But all business is also subject to external economic factors. While regulation, market factors, and compliance requirements may at first appear more operational than strategic, the potential costs saved through risk mitigation and fraud protection imply that compliance, especially among rapid global change, now contributes more to business strategy than ever before.

Considering the increasing rate of change in both how business is done internally and impacted by the external world, modern strategy will not only account for internal decisions, e.g., moving away from paper payments, but also realize regulatory compliance as a contributor to strategic success. That is to say: preventing fraud and mitigating risk to assets and reputation are no longer matters of “checking the box;” rather, comprehensive protection is a matter of many best practices. But what kind of evidence might support this unconventional conversation?


Nacha rules protect–and may optimize–treasury operations

  • Modernizing faster payments methods, including ACH, to protect against payments fraud is continuous. 
  • A new rule requiring account validation for companies using WEB debits went into effect March 19, 2021. 


Fraud prevention is a never-ending activity

  • Trusted partnerships between treasurers, stakeholders and banks are built on meaningful communication that should advance business, not expose it further or raise risk profiles. 
  • U.S. Bank relationship managers are always standing by to provide information and consult with clients on Nacha rules and other regulatory updates.

“Returns and exceptions are really expensive for a company. So, in terms of Nacha requirements, the best companies actually want to do more rigorous validations to protect themselves.”

Digital treasury solutions help to further mitigate fraud risk

  • Optimizing treasury with digital solutions is a future-forward activity that may prepare an organization against the unrealized types of payments fraud experienced in the last year.
  • To comply with and exceed Nacha requirements while helping businesses protect their own customers, U.S. Bank offers account validation services designed to quickly help ensure transactions aren’t falling into the hands of fraudsters.
  • Account validation solutions should be scalable to business size and operations; while digital treasury platforms work well for almost any organization, companies with exceptionally high volumes of WEB Debits can experience added value in API-enabled account validation.


When it comes to reducing fraud, knowledge is power

“Fraud is a concern of every single client of the bank, so there is a great opportunity for their banker to assist them in taking steps to avoid it” says Greg Rettinger, Vice President and ACH Product Manager in Global Payables at U.S. Bank. “Sending funds to new or changed accounts without validating that it belongs to the intended recipient significantly increases fraud risk, especially when there are now more tools available to perform this validation. In many cases, it will be considered not ‘commercially reasonable’ fraud prevention to forgo taking steps to do so”

Rettinger pointed to increasing volumes on ACH has an effect of shifts in consumer spending methods, along with special economic factors (which Rettinger calls “pandemic spending”). But he adds that fraud reduction applies to both payables and receivables, meaning the benefits of account validation may not only reduce fraud, but also exceptions and returns, to name a few.

“Returns and exceptions are really expensive for a company,” he said. “So, in terms of Nacha requirements, the best companies actually want to do more rigorous validations to protect themselves, not just to comply with a rule … the consequences of getting hit for a rule violation are far less than being frauded.”


Trust vs. Skepticism: ‘sophisticated’ fraud requires additional due diligence

Lisa Hunt, Vice President and Senior Product Manager for Global Payables at U.S. Bank, emphasized the need for additional due diligence – not merely regulatory compliance – as the “new normal” in proper fraud prevention protocol.

“Throughout the COVID-19 pandemic, government entities that were working so hard to keep things afloat were frequently targeted by fraudsters applying for relief benefits,” she said, “and these fraudsters are people whose full-time job is to steal money from those who actually need it … it’s something that people don’t even really want to think about.” Hunt and her team regularly meet with anti-fraud experts to understand the latest trends, facts and tactics by fraudsters, then synthesize those trends into anti-fraud protections that inform product development. According to Hunt and the stories she hears from clients, some AP professionals are required to spend almost as much time as “detectives” as they are issuing disbursements.

“Fraudsters apply varied levels of effort and sophistication in their schemes. At times, they can be so effective that it is hard for clients to believe that their new or modified payment instructions aren’t legitimate.”

Hunt said that some of the best anti-fraud and risk mitigation tactics go well beyond the “rule book.” “I don’t like to think about how prominent and sophisticated these fraudsters have become, either,” she said, “but it’s something we all need to confront, and realize that things like Account Validation and Nacha requirements are great tools, but the first line of defense is often a person’s own intuition. Go with your gut; skepticism is free, but fraud can be very expensive.”


For up-to-date information on digital solutions and optimizing treasury, along with strategic insights and navigating Nacha, contact a U.S. Bank Global Treasury Management Relationship Manager today. View details about NACHA rule changes on usbank.com.

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