Reprinted with permission from CentricPro.
Though lenders are for the most part NOT advertising these services – most banks now offer at least one of the following fraud prevention devices: Positive Pay, Reverse Positive Pay, ACH wire blocks and/or International wire blocks. With the spate of cyber-attacks inflicting substantial losses on attorney IOLTA accounts around the region, it may behoove you to investigate whether your lender offers at least one of these services. So what are they?
The positive pay system typically works like this: you provide your lender with a list of checks written from your IOLTA account – for instance, every time you cut checks for a closing, you send that list/disbursement sheet/spreadsheet to your lender. As checks are presented for payment on your account, an employee of the bank will verify the details of each check against the list you provided them to make sure the information is identical. For any anomalies or for any checks presented for payment that do not appear on your list of checks, the lender will contact you.
International Wire Blocks:
Simply put, if you don’t do business internationally, then you have no reason to anticipate an international wire. Ask your bank to place an international wire block on your IOLTA account. Thus, no one will be able to wire money fraudulently into or more importantly, out, of your account.
ACH Fraud and ACH Wire Blocks:
ACH stands for Automated Clearing House and is an electronic funds transfer process between bank accounts. There are only two pieces of information required to commit ACH fraud: a checking account number and a bank routing number. And this information is available on every check you issue. If someone in the firm has been the target of a phishing email and tricked into running malicious keylogging software that records keystrokes, or if a check simply falls into the wrong hands, criminals can get the information they need, including bank account user names and passwords in order to perpetrate an ACH fraud1.
Back in 2009, the FBI reported that there had been approximately $100 million in losses due to ACH fraud with new victim complaints opened on a weekly basis2. Unfortunately with the frauds that continue to be reported today, this is not something that is going away.
Some of you may remember the movie “Catch Me If You Can” with Leonardo DiCaprio playing the role of Frank Abagnale, a counterfeiter who thwarted the FBI’s efforts at capture for years only to become an employee of that organization. The tips noted below are excerpted from an article written by Mr. Abagnale to help those who wish to avoid falling victim to ACH fraud.
1. Ask your bank to place ACH debt blocks on accounts that should not have ACH withdrawals. For example, a trust account or refund account should not have withdrawals via ACH. Such accounts should have ACH blocks. An ACH block rejects all ACH debits3.
2. Bank accounts should be structured so that authorized ACH debits occur in only a few designated accounts. Ask your bank to place an ACH filter on those accounts. An ACH filter allows debits only from companies that have been preauthorized, or in preauthorized dollar amounts. If your bank does not offer an ACH filter, open up a new account exclusively for authorized ACH debits, and restrict who has knowledge of that account number4.
3. Monitor all unblocked accounts daily to catch unauthorized activity. Companies have two business days to reject an unauthorized debit and recover their money. If an unauthorized debit is not questioned for more than two days, it will be much more difficult to recover lost funds. Because all fraudulent ACH transactions originate in real bank accounts, unwinding them is quite straightforward if caught in a timely fashion5.
We offer this information in order to help you stay on top of current trends in the marketplace and to help you evaluate the various tools available in order to better protect your accounts and your clients’ funds.
1Goodchild, Joan, “ACH Fraud: Why Criminals Love This Con.” CSO Online (2010), available at: http://www.csoonline.com/article/2125833/malware-cybercrime/ach-fraud–why-criminals-love-this-con.html
3Abagnale, Frank, “How to Help your Clients Combat ACH Fraud.” Intuit Accountants News Central (July 14, 2014), available at: https://blog.accountants.intuit.com/from-the-experts/how-to-help-your-clients-combat-ach-fraud/