Cybercriminals are increasingly targeting the construction and real estate industry. One of the most prevalent threats? ACH fraud. Here’s what you need to know to protect your business:
Key Takeaways:
- ACH fraud cost businesses over $1.2 billion in 2021
- Construction and real estate firms are prime targets due to large transactions and complex supply chains
- Implementing strong internal controls and employee education are crucial defenses
- Partnering with cybersecurity experts can significantly reduce your risk
Ready to fortify your defenses against ACH fraud? Let’s dive in.
The Rising Tide of ACH Fraud in Construction and Real Estate
Imagine: You’re a successful contractor, managing multiple projects across the city. One day, you discover that a $500,000 payment meant for a key supplier never arrived. Instead, it’s been diverted to an unknown account. This nightmare scenario is becoming all too common in your industry.
ACH (Automated Clearing House) fraud occurs when cybercriminals manipulate electronic fund transfers to steal money. In construction and real estate, where large sums often change hands, the stakes are incredibly high.
Why are you such attractive targets? It’s simple:
- High-value transactions: Your industry regularly processes substantial payments, making each successful attack more lucrative for criminals.
- Complex supply chains: With many subcontractors and vendors involved in each project, there are more opportunities for fraudsters to insert themselves into the process.
- Time-sensitive operations: The pressure to keep projects moving can lead to rushed financial decisions, creating vulnerabilities.
Recognizing the Threat: Common ACH Fraud Tactics
To protect your business, you need to know what you’re up against. Here are the most common ACH fraud schemes targeting our industry:
- Business Email Compromise (BEC): Cybercriminals hack into or impersonate a trusted email account, then request fund transfers to fraudulent accounts. For example, they might pose as a subcontractor asking for payment to be sent to a “new” bank account.
- Invoice Manipulation: Fraudsters intercept legitimate invoices and alter payment details. In a busy accounts payable department processing dozens of invoices daily, these changes can easily go unnoticed.
- Phishing Attacks: Employees are tricked into revealing login credentials for financial systems through convincing but fake emails or websites.
Learn More about Fraud Protections for Your Business
Building Your Defense: Strategies to Mitigate ACH Fraud Risk
Now that we’ve identified the threat, let’s talk about solutions. Here are proven strategies to protect your construction or real estate business:
- Strengthen Internal Controls
- Implement dual authorization for all ACH transfers above a certain threshold.
- Regularly reconcile accounts and review all financial transactions.
- Establish a verification process for any changes to vendor payment information.
- Educate Your Team
- Conduct regular cybersecurity training sessions for all employees.
- Teach staff to recognize phishing attempts and other social engineering tactics.
- Create a culture of skepticism around unusual financial requests or changes.
- Leverage Technology
- Use multi-factor authentication for all financial system logins.
- Implement robust email filtering and anti-malware solutions.
- Consider using bank-provided fraud detection services.
- Partner with Experts
- Engage cybersecurity professionals to assess your current risk level.
- Work with IT (Information Technology) consultants to implement and maintain strong security measures.
- Consult with financial advisors who understand the unique challenges of our industry.
Real-World Impact
Let’s consider the case of ABC Builders (name changed for privacy). This mid-sized construction firm fell victim to a sophisticated BEC attack. A cybercriminal, posing as the CEO, emailed the finance department requesting an urgent wire transfer of $300,000 to a “new supplier.” The email looked legitimate, and the finance team, under pressure to keep a major project on schedule, complied without following the usual verification procedures.
By the time the fraud was discovered, the money was long gone. ABC Builders not only lost the funds but also faced project delays and damaged relationships with their real suppliers. The incident served as a wake-up call, prompting them to overhaul their cybersecurity practices and seek expert guidance.
Your Next Steps
ACH fraud is a serious threat, but it’s not insurmountable. By implementing strong controls, educating your team, and partnering with the right experts, you can significantly reduce your risk.
At Rea, we specialize in helping construction and real estate businesses navigate these complex cybersecurity challenges. Our team of advisors offers comprehensive risk assessments, customized security strategies, and ongoing support to keep your business safe.
Don’t wait for a costly incident to spur you into action. Reach out today, and let’s work together to build a rigorous defense against ACH fraud. Your business’s financial health and reputation are too important to leave unprotected.
By John Kurtin (Dublin Office)