Best practices in bank automated clearing house risk management

Abstract

The extraordinary growth and evolving nature of automated clearing house (ACH) transactions in the US during the past few years have created a recipe for risk. Early detection and prevention of fraud and other risks in the ACH system will protect banks, corporations and consumers, and at the same time preserve the integrity of the ACH brand. Best practices in cheque fraud prevention can and should be leveraged to be instructive in averting ACH fraud. Timely progress is dependent upon teamwork among all constituencies. Certain prevention practices can be adopted immediately to begin addressing potential losses before they occur, rather than waiting until disaster strikes. These efforts include: educating the industry on ACH risks; integrating know-your-customer and risk management behaviours into sales strategies; integrating fraud control procedures and monitoring technology into existing systems; and prevention methods that reach beyond all these practices virtually to reinvent the ACH network. ACH risk management must immediately become a high priority to protect the future of the network and the credibility of electronic payments in the US.