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What is ACH (Automated Clearing House) Fraud?

March 21, 2024 Posted In Criminal Defense,Fraud

Moving money between banks happens with the touch of a keystroke. A clearinghouse provides a safe space for payments, withdrawals, debit, and credit transfers to sit until authorization is given for the transfer. This network is a secure means of moving funds until specific data is breached, giving unauthorized individuals access to financial accounts and the ability to commit financial crimes in Atlanta through fraudulent transactions.

How ACH Fraud Occurs

The secure network, Automated Clearing House (ACH), transfers funds, sends and receives payments, and is overseen by the National Automated Clearing House Association (NACHA). Payments are settled four times a day, and the network’s processing services are open 23.5 hours a day every business day. Transfers occur regularly and fast. However, a slight delay in processing provides the opportunity for fraudulent activity to slip past safeguards.

To commit ACH fraud, an individual only needs access to someone’s bank account number and routing number. Possessing this information allows an individual to transfer funds from an account. In addition, the unauthorized individual may:

  • Make recurring transfers
  • Transfer a lump sum of money
  • Make unauthorized payments for purchases or services

An individual committing ACH fraud exploits the time delay in payments. While this type of fraud is not the most prevalent, its increase should bring awareness to its threat, with Georgia residents experiencing the 5th highest financial loss (Pg. 20) to internet crime.

Where Financial Information may be Compromised

Hackers able to break into any payment processing program quickly gain access to banking information, allowing them to access a customer, client, or patient’s payment information and reroute it to another account. Healthcare payment processors have recently been targeted, prompting a warning from the Federal Bureau of Investigation, Cyber Division. Other avenues used to access account information include:

  • Insider employee fraud giving a business’s employees access to client accounts and allowing them to steal client banking information
  • Email phishing scams
  • Data breaches allowing unauthorized individuals to log into personal or business banking accounts
  • Debit card loss or theft
  • Check kiting or floating funds between bank accounts, making it appear there is more money in an account than is there. When the clearing house approves a transfer, and there seems to be money in an account, the funds have already been moved.

Determining the Penalties for ACH Fraud in Georgia

An individual charged with ACH fraud may face costly fines and prison time. Factors determining punishment for this crime include:

  • The amount of money that is stolen
  • How long the actions take place
  • Review of penalties to determine if charges should be reduced

Federal and state laws may apply to these crimes. Restitution may also be ordered.

ACH Fraud Impact on Individuals and Businesses in Atlanta

Individuals should monitor their accounts closely for unauthorized transactions to freeze any transfer before it occurs. ACH fraud may also impact the following:

  • ACH payroll from employers
  • Tax payments and rebates
  • Social security
  • Child support
  • Other governmental transactions

Businesses in Atlanta can be significantly impacted by ACH fraud, leading to:

  • Financial liability to customers
  • Financial responsibility for chargebacks
  • Potential regulatory fines for compliance violations
  • Reputational damage impacting customer relationships
  • Potential lawsuits

Being charged and convicted of ACH fraud can be personally and professionally devastating. Seek legal guidance from an Atlanta financial crimes lawyer immediately to proceed with the best defense possible.