Protecting Your Business from Bank Fraud
Mary Cabodi, Client Accounting Services
It was a call no one wants to receive. A client reached out recently, shaken after discovering her business bank account had been compromised — nearly $200,000 gone through two fraudulent ACH withdrawals. “You never think it could happen to you,” she said. Now, unfortunately, she knows better.
Simple Steps That Can Save Thousands
The good news: her bank recovered some of the funds.
The better news: there are concrete steps every business can take to make fraud far less likely in the first place. Most banks offer protective tools that cost very little relative to what they safeguard.
Here are the most effective ones worth discussing with your banker today:
- You send your bank a list of every check issued — date, check number, amount, and payee name. The bank then verifies each check before clearing it. Name verification is especially important: one client had 100 checks intercepted by fraudsters who, knowing positive pay was in place, simply altered the payee names. Because names weren’t included in the file, every check cleared. The loss wasn’t discovered for over 45 days.
- The same concept applied to electronic (ACH) transactions. If your account receives or sends ACH payments, this is essential coverage.
- A highly effective structure uses three accounts: one for incoming payments, one for outgoing payments, and one that holds your actual funds. The incoming and outgoing accounts carry a zero balance — funded only as needed — while your main account stays insulated. The incoming account should be restricted to allow no withdrawals except a nightly sweep to the main account. Pair the outgoing account with both forms of Positive Pay, and set alerts for any transaction above a threshold. Fraudsters often start small and escalate — catch them early.
- The sooner you report fraud to your bank, the better your chances of recovering the money. Review your accounts daily if possible, and reconcile monthly at minimum.
- Most banks let you set up email or text alerts for specific account activity. Take 15 minutes to review what your bank offers and turn them on.
- If your business maintains healthy reserves, consider keeping those funds in a separateaccount with no debit access — an extra layer of separation from day-to-day banking activity.
- If you hold more than $250,000 in reserves, an ICS account keeps all your funds at one bank while distributing them nightly across multiple FDIC-insured institutions — so no single bank holds more than the $250,000 coverage limit. This won’t stop fraud, but it does protect against bank failure.
The Bottom Line
Schedule a conversation with your banker. Review what protections you currently have — and what you don’t.
The time investment is small. The peace of mind is significant.