What Is Bank Account Verification?
Bank account verification is the process of confirming the authenticity of bank account information. That includes ownership as well as account and bank routing numbers. The primary purpose of bank account verification is to prevent fraudulent activities such as identity theft, money laundering, and unauthorized access to funds. By verifying the bank account information, financial institutions, service providers and payers can reduce the risks associated with transactions.
In the context of vendor payments, there are two purposes of bank account verification (BAV). First, it is essential to ensure that your organization successfully pays vendors—i.e., has the correct account number and routing number for the right account. And, second, it is critical that the organization avoids paying criminal imposters.
Apart from fraud, you need to ensure that you have the correct routing number and bank account number as required by NACHA Rules. BAV includes verifying the accuracy of the information your vendor provides. But you also need to confirm that the account belongs to the vendor as represented to avoid paying criminals.
BAV Combats Vendor Fraud
Vendor fraud is not new, but the ways fraud perpetrators carry it out are. Business email compromise and vendor email compromise have brought new threats to accounts payable departments. Vendor communications with payment instructions or account changes are not always actually from vendors. Fraud perpetrators are hacking into email systems, which allows them to pose as an internal officer of an organization, or as one of the organization’s vendors.
Convincing emails instruct recipients to issue ACH or wire payments to a bank account controlled by fraud perpetrators. If an organization fails to verify the requested change or neglects to verify bank account ownership and numbers, it’s likely to make an erroneous payment.
Of course, besides fraud, people make mistakes. Vendors and sometimes payables personnel may err in transmitting and updating vendor information. So even apart from criminal activity, bank account verification is essential to ensure payments reach the correct payee (and avoid high return rates and NACHA fines).
To learn how VendorInfo can help you verify vendor bank account owners and information, contact us.