ACH fraud: Understanding what it is and why it happens

ACH fraud happens when criminals gain unauthorized access to bank accounts and use the Automated Clearing House (ACH) network to steal money through fake electronic transfers.

For businesses, a single fraudulent transaction can mean thousands of dollars lost, plus the time and resources needed to recover funds and restore trust. As more transactions move online, fraudsters have adapted their tactics, making ACH fraud one of the fastest-growing financial crimes.

Understanding how ACH fraud works, the warning signs to watch for, and the steps to prevent and respond to it is critical for protecting your business.

What is ACH fraud?

ACH fraud is the unauthorized use of the Automated Clearing House (ACH) network to steal funds. Criminals often gain access to sensitive banking details—such as account and routing numbers—through phishing, malware, or poor security practices.

The ACH network is the backbone of U.S. electronic payments, moving money between bank accounts for payroll, bill payments, and peer-to-peer transfers. In 2024, according to Nacha, it processed 33.56 billion transactions.

ACH fraud vs. other payment fraud

Unlike credit card fraud, where disputed transactions are usually reversed quickly, ACH fraud involves direct debits or credits that are harder to recover once funds leave the account. This makes ACH fraud more damaging and disruptive for businesses.

Who is at risk for ACH fraud?

Businesses processing high volumes of ACH transactions—especially payroll and vendor payments—are prime targets. Small businesses face greater exposure since they often lack advanced fraud detection tools. Financial institutions are also frequent targets, while consumers may be affected if their information is compromised.

The shift from paper checks to electronic payments has only increased the risk, making ACH fraud a persistent concern for finance leaders.

How does ACH fraud happen?

ACH fraud can happen in myriad ways. Criminals use stolen information, deception, or technical loopholes to move money without permission. Here are the most common ACH payment scams and how they play out in practice.

Unauthorized transactions

Unauthorized transactions happen when criminals use stolen account and routing numbers to initiate debits or credits without authorization. They often acquire these details via data breaches, discarded checks, or phishing campaigns, then exploit them to move funds.

• Example: A restaurant owner notices $8,000 missing from their business checking account early one morning. Further investigation shows that fraudsters had copied details from a discarded deposit slip and used them to initiate an unauthorized ACH debit.
• Prevention tip: Restrict access to account credentials to as few users as possible, and reconcile accounts daily to detect anomalous transactions early

Phishing

Phishing scams trick staff into revealing credentials by masquerading as legitimate institutions. Attackers often send urgent emails or texts warning of account “suspension” or “security alerts,” prompting users to click links or submit login data. Once entered, the scammers capture the credentials, and sometimes even multi-factor codes.

• Example: An employee receives an email claiming their account will be frozen unless they “verify” login details immediately. The link leads to a spoofed banking site designed to harvest credentials.
• Prevention tip: Teach employees to always pause and verify suspicious messages, hover over links to check domain names, and confirm requests through trusted channels

Account takeover

Account takeover occurs when fraudsters use stolen or weak credentials to access legitimate accounts. Once inside, they may initiate transfers to accounts they control. These attacks can persist unnoticed for days or weeks.

• Example: A finance team discovers $50,000 missing from their account. Hackers had used credentials obtained in a prior breach to log in during off-hours and move funds.
• Prevention tip: Require multi-factor authentication and flag logins from unfamiliar devices or locations for additional verification

Social engineering

Social engineering leverages human psychology rather than technical flaws. Attackers pose as trusted figures such as bank reps or IT support and pressure staff to override standard security procedures.

• Example: A caller claiming to represent the company’s bank contacts a finance manager, already citing partial account data, and insists additional details are “needed immediately” to secure the account.
• Prevention tip: Create strict protocols requiring identity verification before sharing any sensitive information, regardless of urgency

Business email compromise (BEC)

BEC attacks manipulate trust within internal communications. Criminals either take over a valid email account or spoof an address similar to a legitimate one, then send fraudulent payment instructions. They often tailor their requests based on prior knowledge of vendor or billing relationships.

• Example: An AP clerk receives an email appearing to come from the CEO, asking for a $25,000 ACH payment to a new vendor. The request references recent company activity, making it seem credible.
• Prevention tip: Mandate secondary approval for vendor changes and always validate changes via a different communication method, like a phone call

Fake vendor invoices

Scammers send forged invoices mimicking real vendors and substitute fraudulent bank details. The timing often aligns with busy billing periods, making it easier for these to slip through.

• Example: The finance team receives a routine invoice fraud request from a known vendor but with revised bank account information. When paid, the funds land in a fraudster-controlled account instead.
• Prevention tip: Always confirm changes to vendor banking information through known contact methods before processing payments

Payroll diversion

Payroll diversion fraud reroutes employee paychecks by submitting forged direct deposit changes. This tactic can leverage compromised HR systems, insider threats, or social engineering.

• Example: An employee’s paycheck stops arriving. Inquiry reveals a fraudulent change request had been submitted weeks earlier, redirecting their pay to a fraudulent account.
• Prevention tip: Use secure portals for payroll updates and require employees to confirm changes through personal communication (e.g., a phone call)

ACH kiting

ACH kiting exploits the time delay between when ACH payments are initiated and when they settle. Fraudsters cycle money through multiple accounts to artificially inflate balances and withdraw the same funds multiple times.

• Example: A scammer uses three bank accounts, cycling transfers just before settlement periods close. They withdraw from each account in turn, effectively using money that hasn’t settled yet.
• Prevention tip: Monitor for repeating patterns of transfers across accounts and reconcile balances frequently

Warning signs of ACH fraud

Protecting your business from ACH payment scams requires vigilance and awareness of common tactics fraudsters use to target organizations. Here are some red flags and suspicious activities to watch for:

• Unusual payment requests: Vendors suddenly changing bank account information or requesting payment to new accounts
• Urgent payment demands: High-pressure messages claiming immediate payment is needed to avoid penalties or service disruption
• Impersonation attempts: Emails or calls from people claiming to be executives, vendors, or partners requesting fund transfers
• Account inconsistencies: Payment requests that don't match established vendor patterns or historical transaction amounts
• Poor communication quality: Messages with spelling errors, unusual phrasing, or sender addresses that don't match known contacts
• Bypass attempts: Requests to skip normal approval processes or verification steps for payments
• Duplicate invoices: Multiple bills for the same services or goods, especially with different banking details

Watch for unauthorized transactions by regularly reviewing bank statements and account activity. Phishing attempts often come through emails that look legitimate but contain suspicious links or attachments. Train your team to verify any payment changes through separate communication channels before processing transactions.

The impact of ACH fraud

ACH fraud delivers a devastating blow to businesses across all industries. According to the 2025 Association for Financial Professionals (AFP) Payments Fraud and Control Survey, 38% of responding businesses experienced ACH debit fraud in 2024, while 20% experienced ACH credit fraud. The financial losses can be substantial, with some businesses facing six-figure damages from a single incident.

Beyond immediate monetary losses, ACH payment scams create significant operational challenges that ripple through entire organizations. Businesses must dedicate valuable time and resources to fraud investigation, account reconciliation, and recovery efforts. In July 2025, KBTX reported that Texas businesses lost millions of dollars to sophisticated ACH scams. These disruptions often force companies to halt normal operations while they address security breaches and implement safeguards.

The reputational consequences can prove equally damaging in the long term. Customers lose confidence when their trusted financial partners fall victim to fraud, potentially leading to contract cancellations and difficulty attracting new business. Recovery from reputational damage often takes months or years, making prevention the most effective strategy for protecting both finances and business relationships.

How to prevent ACH fraud

Fortunately, you don’t have to wait around for ACH fraud to happen before you can act. These prevention methods can strengthen your security protocols and minimize vulnerabilities:

• Strengthen authentication: Use multi-factor authentication (MFA) and role-based access controls so only authorized staff can access accounts
• Create strong passwords: Require unique, complex passwords for financial accounts and rotate them regularly using a secure password manager
• Watch for phishing: Don’t click links or download attachments in unsolicited messages claiming to be from banks or processors
• Establish internal controls: Require dual authorization for large transfers, set transaction limits, and conduct regular account reconciliations
• Educate employees: Train staff to recognize phishing and social engineering tactics. Use mock exercises to reinforce learning.
• Use secure technology: Encrypt sensitive data, enable firewalls and intrusion detection, and deploy tools with real-time anomaly alerts
• Verify vendors: Confirm vendor credentials and bank details before issuing payments. Update records regularly to reduce fraud risk.
• Follow compliance rules: Stay current with Nacha operating rules and coordinate with your bank on emerging best practices
• Set up ACH filters: Block unauthorized withdrawals and maintain an up-to-date list of approved users

These measures go a long way toward protecting your business. And the right accounts payable software can automate many of them, reducing the burden on your team.

3 methods to detect ACH fraud

Detecting ACH fraud early can prevent financial losses and operational disruptions. Here are three key strategies for spotting fraudulent activity before it escalates.

1. Transaction monitoring techniques

Monitoring transactions in real time is one of the most effective ways to detect ACH fraud. Be on the lookout for:

• Unusual transaction patterns: Large or frequent transfers to unfamiliar accounts, sudden spikes during non-business hours, or repeated small transfers that may test your system
• Transaction anomalies: Altered account numbers or unusually high transfer amounts compared with normal activity
• Geo-location inconsistencies: Payments from unexpected locations such as foreign countries or high-risk regions

Some businesses only review transactions monthly, but real-time monitoring is critical for identifying and resolving issues quickly.

2. Biometrics and behavioral analytics

Biometric authentication and behavioral analytics add a strong layer of fraud detection by verifying identities and flagging unusual behavior in real time.

• Biometric authentication: Fingerprint scans, facial recognition, or voice verification make unauthorized access nearly impossible. Even if fraudsters steal credentials, they can’t bypass biometric checks without physical access.
• Behavioral analytics: Tools that analyze typing speed, login locations, and device preferences can flag anomalies when a user behaves differently than usual

While these methods are powerful, fraudsters are becoming more sophisticated. It’s still best practice to track your ACH transactions in real time regardless of the security tools you have in place.

3. Information sharing in anti-fraud networks

Staying informed about fraud trends helps your business stay ahead of emerging threats.

• Anti-fraud consortiums: Networks that share data on fraud tactics and trends provide real-time intelligence across industries
• Industry alerts: Updates from regulators, banks, and trade associations keep businesses aware of new fraud schemes. Organizations such as Nacha regularly issue warnings about fraud attempts targeting ACH payments.

Staying connected to these networks and alerts gives your team the information needed to identify potential threats and take preventive action.

What to do if you’re a victim of ACH fraud

ACH fraud prevention is critical. But what if your business has already been affected? Taking immediate action can help minimize losses and improve your chances of recovering funds.

Follow these steps for the best possible outcome:

1. Contact your bank immediately

Notify your bank as soon as you detect unauthorized activity and ask to freeze your account. Businesses often have only 24 hours to report fraudulent transactions for the best chance of recovery.

2. Document everything

Collect details about the fraudulent transaction, including dates, amounts, account numbers, and any suspicious communications. A clear timeline supports investigations and may be required for legal or insurance claims.

3. File an affidavit

Work with your bank to complete and sign an affidavit documenting the fraudulent activity. This step creates a formal record and may be necessary for recovery or legal proceedings.

4. Recover stolen funds

If reported quickly, your bank may reverse unauthorized transactions or coordinate with the receiving bank to recover funds. If unsuccessful, consult legal counsel to explore claims under the Uniform Commercial Code (UCC) or other regulations.

5. Report to law enforcement and regulatory authorities

File a police report to create an official record. Also report the incident to agencies such as the Federal Trade Commission, which provides guidance and resources for handling financial fraud.

6. Notify affected parties

Inform vendors, clients, or partners impacted by the fraud. Transparency helps preserve trust and allows others to take preventive steps.

7. Review and strengthen security measures

Identify vulnerabilities in your financial processes and address them. Implement stronger authentication methods and conduct regular security audits.

8. Monitor accounts regularly

Establish daily account reconciliation to spot unauthorized transactions early. Consider investing in fraud detection tools that flag unusual activity before it escalates.

While it’s good to have these steps to fall back on if your business experiences ACH fraud, the fact is that businesses aren’t always able to recover the stolen funds. You’ll want to invest time and resources toward ensuring that you’ll never have to use these steps.

Use Ramp to automate your AP and protect your business

While ACH fraud is a serious risk, it can be prevented with strong security measures and a proactive approach. Acting quickly when fraud occurs can help reduce long-term damage, but prevention is the best strategy.

Staying on top of fraud prevention can be difficult, but the right AP automation software can help. Ramp Bill Pay offers:

• Multiple layers of security to prevent unauthorized access
• Multi-factor authentication and step-up authentication for high-risk activities
• Automated monitoring and alerts for suspicious activity
• Invoice matching that flags potential overpayments or fraud

Ramp Bill Pay also streamlines your accounts payable process. You can automate approval workflows, ACH payment initiation, and vendor onboarding—freeing your team to focus on more strategic work.

See what else Ramp Bill Pay can do for your business.

This post includes general information about ACH payments. For help with ACH functionality specific to Ramp, visit Ramp Support for more details.