Nov 24, 2015
Nonprofits must be on the look out for fraudsters trying to use the Automated Clearing House (ACH) network to pull off a scam. The ACH is a widely used system to electronically transfer funds between banks by using just the account and routing numbers, the Consumer Financial Protection Bureau noted.
Criminals are turning to ACH fraud schemes since they only need the account and routing number to steal money from people and businesses. Nonprofits must be especially wary of ACH fraud because it defrauds both their organization and potential donors.
According to Digital Transactions, ACH fraud cases are on the rise as more individual customers use ACH to setup and make continued payments.
How to spot it
Many scammers will send out phishing emails embedded with malicious code. Once an unsuspecting victim opens the message, the software enables the fraudster to log the victim's keystrokes and potentially gain access to any financial information the victims enter on their computers or online.
When it comes to trying to steal money from a nonprofit, a criminal can use the stolen banking information to make a large contribution, sometimes ranging in the thousands of dollars, to a nonprofit. The following day, the scam artist will notify the organization that the automatic donation made to it was a mistake and ask the nonprofit to refund the money.
After telling the charity about the mistake, the con will then contact his or her bank and inform it that the nonprofit took an incorrect amount. After all is said and done, the scammer will effectively receive two refunds - one from the nonprofit and one from the bank.
Nonprofits must make sure they monitor their accounts for any suspicious activity. Close observation of the books is critical, CSO noted, since businesses can reverse any financial irregularities when caught early.
More convenience equals more fraud
Nonprofits need to be more vigilant than ever to combat this type of fraud since it could increase as more customers and businesses express interest in same-day ACH transactions, according to the Association for Financial Professionals.
Faster ACH payments add convenience to making regular payments but it also cuts down on the amount of time businesses and nonprofits have to detect a fraudulent transaction. A smart nonprofit must be alert for any financial activity or donations that seem dubious.