Risk Associated with Latest Changes to Same Day ACH

Kurtis Suhs
Founder and Managing Director, Cyber Special Ops, LLC

Mr. Suhs serves as the Founder and Managing Director for Cyber Special Ops, LLC, a cyber risk company that provides its clients with Concierge Cyber, a revolutionary new delivery solution for cyber risk services modeled on concierge medicine.

The National Automated Clearing House Association (NACHA) is making enhancements to offer same day ACH more quickly, allow for larger per-transaction value, and add an additional processing window later in the day. Here is a brief timeline and explanation of those changes:

• March 20, 2019 the availability of funds for many Same Day ACH and other ACH credits will occur sooner in the day.
• March 20, 2020 the per-transaction dollar limit for Same Day ACH will increase from $25,000 to $100,000.
• March 19, 2021 access will be extended by enabling Same Day ACH transactions to be submitted to the ACH Network two hours later every business day.

So why is wire fraud expected to increase? Why will it go up when banks are essentially providing the same service to customers that they do today, only giving them their money sooner? Well, the answer is because bad guys love speed and convenience. Same day ACH will enable fraudsters to abscond with money before the bank or its corporate customer even discovers the fraud.

Business Email Compromise Will Increase

In 2019, the FBIs Internet Crime Compliant Center (IC3) received 23,775 Business Email Compromise (BEC) complaints with adjusted losses of over $1.7 billion. BEC is a sophisticated scam targeting both businesses and individuals performing a transfer of funds. The scam is frequently carried out when a subject compromises legitimate business email accounts through social engineering or computer intrusion techniques to conduct unauthorized transfers of funds.

Account Takeover Will Increase

It is no secret that fraudsters are stockpiling online banking credentials in what we often refer to as sleeper fraud, where they keep accounts on hand until they are ready to attack the bank en masse. After same day ACH, we can expect to see escalated levels of account takeover since fraudsters can move the money in larger and faster quantities on compromised accounts.

Online Banking Losses Will Increase

If you want to see what will happen to U.S. online banking accounts, just look to the U.K. for the most likely scenario. Online banking losses in the U.K. doubled immediately after Faster Payments launched and never really came back down to the pre-Faster Pay levels afterwards.

Payment Fraud and Bill Pay Losses Will Increase

Organizations that track their ACH and Bill Pay Fraud losses, will probably notice a big uptick in Bill Pay-related fraud losses. Fraudsters can set up new payees and send funds, or even divert funds to new locations using the same payee accounts by changing the details. Bill Pay losses will increase with same day ACH.

Time is of Essence

Upon discovering wire fraud, organizations should file a suspicious activity report (SAR) to the FBIs Internet Crime Complaint Center (IC3). The mission of the IC3 is to provide the public with a reliable and convenience reporting mechanism to submit information to the FBI concerning suspected internet-facilitated criminal activity and to develop effective alliances with law enforcement and industry partners. Information is analyzed and disseminated for investigative and intelligence purposes to law enforcement and for public awareness. Since the establishment in February 2018, IC3 established the Recovery Asset Team (RAT) that has helped streamline communication with financial institutions and assist FBI field offices in the recovery of funds for businesses that report a fraudulent domestic wire transfer. The RAT, which was established as a standalone team in 2018, completed its first full year of operation in 2019, assisting in the recovery of over $300 million lost through online scams, for a 79% return rate of reported losses. Time is critical, typically within 48 hours of the transfer request, when dealing with BEC, so the RAT can communicate with the domestic financial institutions to freeze funds before they have been transferred.

Best Practices to Minimize Wire Transfer Loss

• Always verify the authenticity of each wire transfer request. Call the person, using a number you have previously called not one from the current wire transfer request to verbally verify it.
• Implement a call-back verification process when setting up payment instructions for a new vendor or making changes to payment instructions for an existing vendor.
• Implement dual control and segregation of duties.
• Set prudent wire transfer limits and/or outright prohibit the ability to initiate overseas wire transfers
• Educate your employees to protect your financial assets.
• Perform internal audits to ensure controls set up are being followed.
• Develop adequate policies and procedures.

Review your business insurance policy. Does it cover financial losses due to theft of money? Coverage might be found in a Crime Policy with a Computer and Funds Transfer Fraud Insuring Agreement, a Business Owners Policy that provides coverage for Theft of Money and Securities or a Cyber Policy with Social Engineering Coverage.