Nacha recently introduced a new term called “false pretenses” that refers to fraud involving misrepresenting identity, authority, or account ownership. The term is used to describe common fraud scenarios like Business Email Compromise (BEC) and vendor impersonation.
Why was the term introduced and what does it mean for me?
As part of Nacha’s effort to fight ACH fraud, especially BEC scams, banks can now return ACH entries that they think were made under false pretenses. Returns under the R17 code were previously limited to more technical reasons like incorrect formatting, but now can be used when a payment is believed to have been obtained through deception or misrepresentation.
By introducing the new term, expanding the use of return code R17, and allowing banks to return ACH transactions due to fraud based on false pretenses, Nacha hopes to improve clarity in handling fraud cases, reduce the number of successful fraud attempts, and improve the recovery of funds after fraud has occurred.
Here are some specific examples of what “false pretenses” might look like:
- A fraudster gets someone’s login info and makes a payment from their account.
- A fraudster lies about who they are or who owns the account receiving the money.
- A fraudster pretends to be the CEO or CFO and tricks someone into making a payment.
- A fraudster pretends to be a vendor and asks for payment.
- A fraudster pretends to be a real estate agent or attorney and asks for money.
- A fraudster pretends to be an employee and asks for payment.
- A fraudster gets into a company’s payroll system and changes where the money goes.
While the financial service industry continues to implement changes to protect consumers, you should still be diligent in your own efforts to keep your information and accounts safe! Here are some ways to protect yourself from false pretenses scams:
- Verify, verify, verify: Always double-check the identity of anyone requesting payment, especially if it’s unexpected. Call the person or organization directly using a known phone number, not one provided in a suspicious email or text.
- Be cautious of urgent requests: Scammers often try to create a sense of urgency to pressure you into acting quickly without thinking. Take your time and verify the legitimacy of the request.
- Watch out for inconsistencies: Look for anything that seems out of place, such as an unusual email address, poor grammar or spelling, or a sudden change in payment instructions.
- Use strong passwords and two-factor authentication: This can help protect your accounts from unauthorized access.
Educate yourself and your employees: Make sure everyone in your organization is aware of false pretenses scams and how to avoid them. - Keep software updated: Regularly updating your operating system and security software can help protect against malware and other threats.
- Review account activity: Monitor your bank and credit card statements regularly for any suspicious activity.
- Report suspicious activity: If you think you may have been a victim of a false pretenses scam, report it to your bank and the authorities immediately.
If you have any questions or think you might be a victim of fraud, we’re here to help! Contact your Business Banker or Relationship Manager today.
