What to Expect When Fraud Strikes Your Business

According to a comprehensive survey, 80 percent of American organizations were victims of payment fraud attacks or attempts in 2023. That’s up 15 percent from the previous year, and nearly a third of all business victims were unable to recover the lost funds.

Pinnacle publishes a lot of advice about how to avoid fraud and keep your data safe. But what happens when, despite everyone’s best preventive efforts, fraud strikes your business?

First, a few principles:

• Time is of the essence. The faster you contact your bank, the better your chances of recovery.
• Working in partnership, we can be more successful. Both your business and your bank must take reasonable precautions to prevent fraud.
• There are no guarantees. At Pinnacle, we will do everything we can to help you recover part or all of your money. We have a respectable success rate but manage a lot of variables like:
  • How much time since the fraud occurred
  • Whether someone tricked you or an agent of your company into authorizing the transaction, which gives us extremely poor chances of recovery
  • What type of transaction it is (check, ACH, wire, etc.)
  • Swift action and cooperation by other banks involved
• Pick the right partner before fraud takes place. In such a charged situation, you need to move fast and have banking partners who move with urgency, too. How easily can you get someone on the phone in a panicked moment? That could make a major difference in the outcome.

Now for the steps you and your bank should take, based on the a few common types of fraud.

Check Fraud
Checks continue to be most vulnerable payment method for fraud, with 65 percent in the survey reporting them. Paper checks are especially easy targets. There are time limits for reporting, starting on the date an item clears on your statement:

• Front-of-check fraud (altered payee or amount) 60day limit
• Back-of-check fraud (forged endorsement) six months.

In general, the steps are: Contact the bank, fill out and sign an affidavit, and file a police report in the city where you live. Pinnacle will put a fraud advisory on your business’s account or place it in a restricted status temporarily to help prevent further fraud. In cases of altered payee or amount, the liability is typically on the bank that accepted the deposit, but funds recovery is not guaranteed and can often take 120 business days or more.

In the meantime, the typical practice is to close the account and open a new one. A great banking partner will assist you with this process to make it as easy and seamless as possible and explain solutions for prevention. Business clients with an isolated incident can avoid opening a new account by signing up for positive pay, especially with payee match, which allows you to verify items presented for payment and accept or reject any exceptions. 

Read about how to prevent check fraud in our Learning Center.

Wire Fraud
Contacting your bank within 24 hours, but no more than 72 hours, provides the best chance of recovery. Contact the bank immediately to explain you’ve been a victim of transfer fraud and need to request a SWIFT recall. The right banking partner has the experience and training to calmly walk you through this process, proceed with urgency on your behalf and keep you informed. You’ll be asked to give the reason (wrong bank, wrong account, etc.). Wire fraud can happen for various reasons, including compromise of your systems. It important that you reach out to your business’s incident response team to determine how it happened. Then contact law enforcement to file a police report and visit ic3.gov to file with the FBI’s Internet Crimes Complaint Center.

Read advice for preventing wire fraud in our Learning Center.

ACH Fraud
When an unauthorized ACH transaction is received and posted to an account, a personal account holder has up to 60 days to report to their bank, while businesses have just 24 hours because federal protection for businesses falls under the Uniform Commercial Code (UCC). We recommend businesses reconcile their accounts daily to catch fraud quickly.

When a fraudulent ACH transaction(s) is originated from your account, perhaps due to account change information received through a business email compromise, report the incident to the bank immediately for assistance with attempted recovery of the funds. (There is no guarantee.) You can also file a report with the police and ic3.gov.

Read about tips to prevent business ACH fraud and more in our Learning Center.