Tactical Treasury: Fraud prevention is a never-ending task

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.

Businesses, consumers and entire industries 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. 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 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.
  • U.S. Bank is scheduled to expand bank account validation services to clients with eBill Service, a business-to-consumer-electronic bill payment and presentment platform, in early 2021.

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 as 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.”

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 upcoming NACHA rule changes on usbank.com.