Fraud Monitoring vs. Transaction Monitoring - Key Distinctions to Know for the New Nacha Rule
Nacha’s new Fraud Monitoring Rule (the “New Rule”) requires risk- and role-based fraud monitoring. It explicitly applies to banks (ODFIs) as well as their non-consumer customers that submit ACH Entries on behalf of themselves or third parties.
Nacha has created a list of vendors that provide “fraud monitoring” services pertinent to the New Rule. Many provide some form of transaction monitoring and/or behavior monitoring services. The question has been raised: Is it sufficient to rely on transaction or behavior monitoring to demonstrate compliance with the New Rule? This blog addresses that question.
As a preliminary matter, let’s establish that compliance requires records, and more particularly records that meet the Federal Rules of Evidence – i.e., they would stand up in a Federal court of law to establish that an event occurred. That means that risk management without records that meet that standard would not protect the bank in the event of a compliance enforcement action.
The New Rule itself explicitly raises the possibility of an enforcement action. It states that it is enforceable by Nacha pursuant to its Rules Enforcement powers contained in Article 9 of the Operating Rules. That Article in turn states that Nacha may bring an enforcement action against an ODFI for its or its customers’ compliance, typically based on excessive Return Rates or RDFI complaints. Nacha may also bring action against an ODFI for failure to comply with annual compliance audit requirements, or to attest to proof of its Third-Party Sender’s audit. Finally, the Rules make clear (in the Article 2 General Rule) that the ODFI is responsible for its Originators’ and Third-Party Senders’ compliance.
As discussed above, the New Rule requires role-based compliance: more specifically, it states that the covered entity (the ODFI, Originator, TPS or TPSP) “must establish and implement risk-based processes and procedures, relevant to the role it plays in the authorization or Transmission of Entries[.]” (Emphasis added for clarity.) As a party largely engaged in the Transmission of Entries, the ODFI may reasonably conclude that implementing a well-regarded transaction-monitoring service could help it demonstrate compliance with the New Rule, as it applies to its own operations. Indeed, the inclusion of various transaction-monitoring services in Nacha’s list of vendors supports that conclusion. Adding a behavior-monitoring tool, which reviews other factors relating to the submission of an Entry to the ODFI and analyzes them for patterns indicative of fraud, could also be seen as relevant to the bank’s demonstration of compliance with the New Rule, for the same reason.
What about a Third-Party Sender? Presumably, a high-volume TPS that relies on third parties for origination (compliance with the Article 2 requirements) could also point to use of a transaction and/or behavior monitoring service to show compliance, as its role is similarly in the transmission of Entries.
But what about a party whose role involves the authorization of Entries? Authorization is covered in Article 2 of the Operating Rules, and as an uncapitalized term in the New Rule could be read to mean compliance with any the origination requirements pertinent to fraud prevention. Just as one example, a party that originates a consumer debit authorized orally by telephone is required to verify the consumer’s identity. In the New Rule FAQs, Nacha also emphasizes another procedure specific to the Originator role:
Originators may be best placed to implement procedures to protect against account takeover or other vectors for initiating unauthorized transactions. Such procedures could include change controls regarding payment information and instructions for vendor and payroll payments.
Clearly, Nacha expects Originators involved in corporate credits or certain recurring consumer credits (direct deposit) to show that they’ve implemented procedures to verify the validity of instructions they receive to change the payment information for those transactions, in order to staunch a very common vector for fraud that (presumably) often evades transaction monitoring.
Neither of the above examples involve transaction monitoring. And, to underline this point, Nacha states in the FAQs that screening of “every ACH entry individually” is not required under the New Rule – i.e., the Rule means something different.
Taken together, these factors mean that compliance with the new Fraud Monitoring Rule, on the one side, and transaction or behavior monitoring, on the other, are not the same. In some cases, as it relates to a party’s role or risk, records that evidence transaction or behavior monitoring can support compliance with the New Rule. In other cases, and particularly in the case of the Originator, they would not suffice.
The Overlooked Risk in Nacha’s New Fraud Monitoring Rule — and How LexAlign Solves It
The Nacha Fraud Monitoring Rule, effective March 2026, is one of the most significant updates to ACH compliance in years. It requires every non-consumer participant in the ACH Network — banks, Originators, and Third-Party Senders — to implement risk- and role-based fraud monitoring procedures.
But here’s the real challenge: your customers are the frontline of fraud. They’re the ones targeted under what Nacha has called “the most significant” form of fraud to account holders: Credit-Push Fraud. If their defenses fail, the risk doesn’t stop there — it flows directly back to the bank.
And the ACH Rules are clear: banks are responsible for ensuring their customers comply. That means gaps in customer compliance are a liability for the bank.
So, how can banks realistically meet this new compliance requirement while protecting themselves from fraud risk?
The answer is LexAlign.
When is it Reasonable to Rely on Customer Fraud Prevention?
The New Rule permits FIs to rely on other parties involved in origination to carry some of the burden of fraud prevention. However, in FAQs, Nacha states clearly: "The basis for relying on another originating entity should be reasonable and clear (e.g., allocated by contract and verified by appropriate oversight)." That means complete reliance on contracts is likely insufficient as a basis. FIs need to verify customers are managing risk via oversight. But how can an FI do this at scale?
Among the resources available to banks and credit unions for the New Rule, LexAlign is uniquely focused on fortifying the true frontline of fraud — your customers — while also giving FIs the records they need to demonstrate oversight and compliance.
With LexAlign, banks don’t just “check the box” on compliance. They:
- Empower customer compliance
- Strengthen customer defenses against ACH fraud
- Reduce exposure to liability when fraud occurs
- Generate audit-ready compliance records examiners expect to see
How LexAlign Works
LexAlign operationalizes Nacha’s new fraud monitoring requirements into a concrete, customer-facing program that produces actionable data for both banks and their customers. Here’s how it works:
Step 1: Customer Self-Assessment
Your commercial customer logs into a simple dashboard. No training needed. Through a intuitive, conversational self-assessment, LexAlign determines their actual ACH activity — consumer vs. corporate transactions, credits vs. debits – to determine their role (Originator vs. Third-Party Sender) and applicable requirements.
LexAlign then analyzes their compliance with the applicable Nacha Operating Rules and Guidelines, regulations, statutes, and official guidance.
Step 2: Instant Results for Customers
When the self-assessment is complete, customers instantly receive:
- An Audit Report containing three essential data points:
- Inventory of their regulated transactions
- Gap Analysis with rule references and compliance status
- Action Plan with step-by-step remediation guidance
- Policy & Procedures packet for training and compliance demonstration
- Interactive Remediation Checklist to track and attest to fixes
This transforms vague compliance expectations into concrete, actionable steps.
Step 3: Actionable Data for the Bank
While customers are empowered, the FI receives:
- Risk-Based Scoring to identify customers with elevated risk
- Data points that enable proactive, targeted and effective risk management routines
- Insight on customer needs and well-being
- Objective bases for taking actions
- Audit-Ready Records that show regulators the bank has performed according to the Rules
Engagement is another differentiator: while manual surveys typically get less than 25% completion, banks using LexAlign regularly achieve 80%+ engagement and compliance scoring across 100% of their commercial customers.
Why This Matters for the Nacha Fraud Monitoring Rule
Without proactive measures, FIs shoulder the liability.
But with LexAlign, FIs:
- Strengthen fraud defenses at the customer level
- Demonstrate oversight
- Manage the risk of fraud-related liability via records that demonstrate responsibility and alignment with Nacha's rules and guidance
- Have a plausible argument for shifting the risk of payment orders to their Originators under applicable statutes
This is why LexAlign is more than a tool — it’s a liability-limiting function for banks under Nacha’s New Rule.
The Bottom Line
The Nacha Fraud Monitoring Rule isn’t just another regulation. It’s a strong signal that Nacha intends to enforce ODFI responsibility for customer compliance and fraud prevention.
With LexAlign, FIs finally have a scalable way to:
- Enforce Nacha compliance across all customers
- Protect themselves from liability
- Build audit-ready records examiners will accept
Don’t wait until March 2026 to figure this out. The risk is already here — and Nacha intends to enforce it.
LexAlign makes compliance clear, actionable, and defensible — for FIs and their customers alike.
Nacha’s New “Attestation of Proof of Audit” Requirement — What It Means for ODFIs and TPSs
Last month, Nacha signaled another significant change in ACH compliance: in ACH Operations Bulletin 3-2025 (9/11/25), Nacha announced that ODFIs will be required to submit attestation of proof of annual rules compliance audits through Nacha’s new secure channel, as soon as this month (October 2025). This most recent development builds upon earlier recommendations from Nacha’s Risk Management Advisory Group (RMAG) and has direct implications for both banks and their Third-Party Senders (TPS).
Nacha’s Wording Implicates Records
The subtle but important requirement is that Nacha is requiring not just an attestation of audit but an attestation of “proof” of audit. Nacha clarifies that:
Proof of audit typically includes audit reports, internal review documentation, remediation plans for any identified deficiencies, and confirmation of management oversight.
While Nacha is not requiring that banks (ODFIs) submit more than an attestation, an attestation is a legal statement reflecting knowledge of certain facts. An attestation by an officer of a bank creates the risk of liability for both the officer and the bank. Though Nacha explicitly leaves it to the bank to determine if reliance on a TPS attestation of audit is sufficient under the bank’s policies, it could be risky to do so, as Nacha has previously signaled.
From “Check-the-Box” to Real Accountability
In February 2025, Nacha and RMAG raised concerns in a piece titled Should an ODFI Ask a TPS for Proof of a Rules Compliance Audit?. In that blog, they discussed their concerns that many TPS’s (across ODFIs) were simply signing attestations that they had performed an audit — without ever conducting one.
As Trevor Lain, CEO of LexAlign, explains:
“What RMAG members found is that customers were checking the box — attesting they’d completed an audit — but when asked for documentation, they had nothing to show. Banks were trusting, but not verifying. This isn’t sustainable from a legal or regulatory perspective.”
Because, under Article 2 of the Nacha Operating Rules, ODFIs are primarily responsible for their Originators’ and Third-Party Senders’ compliance, relying on unchecked promises leaves banks exposed.
In short, the liability ODFIs have long placed on their TPSs has officially shifted back to them – and it's now time to upgrade their policies, procedures and operations to be ready.
What the New Nacha Bulletin Implicates
The new ACH Operations 3-2025 bulletin automates and enforces oversight:
- ODFIs will be required, upon request, to submit attestation of proof of audit through a secure Nacha channel
- By automating the outreach/response process, Nacha can now request many more ODFIs than previously to supply the attestations in a given year.
- This doubles down on the reality faced by large institutions which must demonstrate not just attestations, but documented audits.
- Nacha’s intent is clear: move the industry from self-certifications to reviewable, verifiable compliance audits.
As Lain notes, this reflects a broader trend:
“This isn’t just about ODFIs anymore. Each originator and each TPS now has a defined role in compliance and risk management. Nacha is saying: ‘We’re not kidding.’”
Why It Matters
- For ODFIs: You must ensure you can demonstrate not just your own compliance, but also that of your TPS customers.
- For TPS: You can no longer simply sign an attestation. You’ll need a real, documented rules compliance audit — and be ready to deliver it to your ODFI.
- For Regulators: The move shows Nacha’s increasing seriousness in pushing the Network toward proactive fraud prevention and risk monitoring.
How LexAlign Helps
LexAlign already equips ODFIs with automated, compliance diagnostic assessments for Originators, that is designed to empower their compliance and reveal hidden TPS. Now, we’re extending that capability to TPS. Our Third-Party Sender Audit Module enables:
- Risk-based compliance reviews of TPS activities in line with the Nacha Operating Rules and Guidelines
- Records and data that empower TPS compliance and enable ODFIs to demonstrate proof of audit, including audit reports with gap analyses and remediation plans, checklists, policies and procedures, attestations and acknowledgements – all designed to meet the Rules of Evidence.
- Efficiency and scalability, especially for banks with hundreds or thousands of TPS or originators.
As one senior banker recently described it, LexAlign’s TPS audit is “the wedge into the bank” — an accessible first step toward a broader compliance strategy.
Here’s The Good News
Nacha’s latest bulletin is more than a technical update. It’s a clear statement: the era of “check-the-box” compliance is over. Banks must be able to prove that audits are conducted, and TPS must be prepared to deliver them.
But here’s the good news: LexAlign provides the framework for doing just that — helping ODFIs and TPS move from promises to satisfactory proof, at scale.
Learn more about how LexAlign supports ODFI and TPS compliance, talk to our team!
The Hidden “Gotcha” Within Nacha’s New Fraud Monitoring Rule
Think You’re Ready for Nacha’s New Fraud Monitoring Rule? Think Again.
Your bank has implemented state-of-the-art transaction and behavior monitoring solutions for fraud detection. That’s a great first step. Unfortunately, you’re still about to be dinged under Nacha’s new Fraud Monitoring Rule (“New Rule”).
Don’t get us wrong: if you haven’t implemented modern fraud detection systems, you’re behind the times and need to catch up. The good news is that there are lots of great solutions you can choose from.
But that’s not sufficient under the New Rule. Because the Rule is not really about you.
Here’s what to know: with the New Rule, Nacha is signaling it’s going to start enforcing the bank’s (ODFI’s) responsibility for its Originators’ and Third Party Senders’ compliance, under the Article 2 “General Rule.”
How do we know this? Because Nacha forecasts new requirements in articles and blogs months or years in advance. To understand new ACH rules, you have to read the context.
In 2022, Nacha made a bold statement that got too little attention. In an article entitled, “A New Risk Management Framework for the Era of Credit-Push Fraud,” Jane Larimer, Nacha’s President and CEO, stated bluntly: “Fraud keeps changing. As it does, participants in the payments system need to understand and adapt to emerging fraud scenarios and develop counterstrategies to help protect their customers and themselves.”
She said, the problem is we’re focused on yesterday’s fraud. In the past, Debit Fraud —that is, unauthorized debits of consumer accounts— was the biggest threat, and the Network did a good job combatting that. Indeed, most of the “Prerequisites to Origination” covered in Article 2 of the Nacha Operating Rules were created to prevent Debit Fraud.
But, she said, “Now, however, the most significant fraud threats to bank account holders involve fraud and scams that result in money being sent out of their accounts using credit payments, including ACH credits, wires, cards, and other instant and digital payments” – that is, Credit-Push Fraud, which encompasses a range of schemes also known as Authorised Push Payment (APP) fraud, or “relationship and trust fraud,” including (but not limited to) vendor and employee impersonation fraud.
To combat this fraud, she said we need to change in two key ways: (1) more fraud information sharing, and (2) the involvement of “all participants” working together. (Specifically, she wrote: “All participants in the payment system, whether the ACH Network or elsewhere, have roles to play in working together to combat fraud.”)
“All participants” necessarily includes the parties doing origination – which obviously includes customers as Originators or Third-Party Senders. We tested this interpretation with Nacha back in 2023, and they said, “of course.”
But let’s face it, all too often banks rely on origination agreements, providing their customers a 700+ page book of rules, training at onboarding, and online explanations of Rule changes as the extent of their responsibility.
This has not pleased Nacha, as we learned when we interviewed Jordan Bennett in a webinar (available here). He stressed that ODFIs warrant the compliance of each Entry originated through it to the Network, that ACH usage evolves as organizations change over time, that agreements and Rules access don’t fully discharge the ODFI’s responsibility for that compliance, and that Nacha is raising fines so that they’re both too much to pass to a customer and too high to be treated as the cost of doing business.
So then, with the New Rule, Nacha codified its earlier call for “all participants” (or at least all non-consumer participants) to play a role. The New Rule doesn’t begin with “Each ODFI” but rather with “Each non-consumer Originator, each Third-Party Sender…
Nacha is clearly signaling that they’re serious about the “all participants “ emphasis, they’re serious about the need for the customer to manage their fraud risk, and they intend to enforce it. “Enforce it” means they’re looking to you for records demonstrating that your customers are meeting the New Rule requirements. Make no mistake: it’s your responsibility for your customers’ compliance they’re intending to enforce.
So how can you effectively recruit your customers into the risk management framework? And once successful, how can you demonstrate that your customers are compliant, and that you’re exercising your Article 2 responsibility? The team at LexAlign is here to help. LexAlign hosted a webinar with Nacha recently, where we covered the entirety of this New Rule and explained how to use our solution to help you demonstrate your customers’ compliance. And we’re here to help!
Download the Checklist below to learn more about how you can be ready for the New Rule by March 2026.
What the Nacha Fraud Monitoring Rule Really Means (and Why Banks Can’t Ignore It)
Nacha’s new Fraud Monitoring Rule is poised to take effect (i.e., becomes enforceable) for your higher-volume Originators/TPS on March 20, 2026, with universal applicability beginning June 19, 2026. While it’s tempting to focus on what that means for the bank’s internal risk monitoring, the Rule actually starts with “[e]ach non-consumer Originator [and] each Third-Party Sender…must…” Under the General Rule (2.1), Nacha holds the bank accountable for those customers’ compliance.
How are you going to demonstrate customer compliance by the applicable deadline? Don’t fret: there is a way. Here’s what to know…
The New Rule marks a significant shift: fraud prevention now officially begins at the point of origination. Transaction monitoring at the bank–while important–is not sufficient for compliance. We have to sensitize and empower the customer to manage their fraud risk.
What the New Rule Requires of Customers
- Phase 1 (March 20, 2026): The Rule is enforceable as to non-consumer Originators and Third‑Party Senders (TPS) that originated more than 6 million Entries in 2023.
- Phase 2 (June 19, 2026): Enforceability extends to all remaining Originators and TPS.
- The Rule requires these customers to implement “risk-based processes and procedures…that are reasonably intended to identify Entries that are suspected of being unauthorized or authorized under False Pretenses,” and to review the adequacy of those processes and procedures annually.
- “False Pretenses” are defined as “the inducement of a payment by a Person misrepresenting (a) that Person’s identity, (b) that Person’s association with or authority to act on behalf of another Person, or (c) the ownership of an account to be credited.”
Why Current Tactics and Legacy Tools Are No Longer Sufficient
- Nacha’s own Credit-Push Fraud Monitoring Resource Center underscores that the rule requires that non-consumer Originators and TPSs establish and implement risk-based processes and procedures to identify Entries suspected of being unauthorized or authorized under False Pretenses.
- Nacha’s Risk Management Advisory Group (RMAG) also emphasizes that simply doing nothing is not acceptable—risk monitoring must be meaningful, documented, and operational.
- Finally, RMAG encourages banks to “look for opportunities to automate,” and to see what vendors offer that can meet the new fraud monitoring requirements.
No Liability Shift for ODFIs
While the rule shifts attention to the originators and third-party entities, liability remains squarely with the ODFI (as in our recent interview of Nacha staff), as the ODFI warrants the compliance of each Entry, and is responsible for its Originators’ and TPS compliance. Nacha makes clear that origination agreements or attestations do not absolve banks of responsibility.
Where LexAlign Fits In
LexAlign operationalizes customer-level compliance. We enable:
- Guided fraud monitoring assessments for customers, aligned with Nacha’s Rules.
- Tailored gap analyses, action plans, policies and remediation checklists that empower customer compliance.
- Visibility for banks into the compliance posture of 80%+ of customers (compared to–at a high end–25% with manual alternatives), with scoring and analysis that enable targeted, efficient risk management before something bad happens.
- Automated records—including dashboards, data and reports—that demonstrate alignment with Nacha’s Rules and other regs and FFIEC Guidance, so that even when fraud does occur, you prevent it from getting much worse.
- Fraud-related litigation risk mitigation: customer audit reports designed to protect the bank from liability under pertinent statute.
What Can Be Done?
March 2026 is coming fast—and with it, Nacha’s enforcement begins. Banks that overlook operationalizing customer compliance may face fines, regulatory scrutiny, or worse. LexAlign is actively helping banks build their 2026 plans to comply with the new rules, helping them fortify the frontline, stay audit-ready, and uphold their institution’s standards. We’re booking launch slots now. If you’re interested in demonstrating customer compliance in March, do not delay reaching out to us.
Looking to do the same? Let’s talk.
Learn more about how LexAlign equips banks to meet Nacha’s new Fraud Monitoring Rule in our on-demand webinar.
The Missing Piece in Fraud Prevention
If you ask an AI agent to provide an overview on fraud, the agent surveys the current content and generates content. It will accurately tell you that trends to watch include AI-Powered Social Engineering; Identity Theft and Synthetic Identity Fraud; Real-Time Payment (RTP) Fraud; and Supply Chain Fraud [impersonating vendors]. But then in telling you how to manage fraud, it clearly isn’t connecting the dots. What connects all those trends is something Nacha, the organization that governs banks’ and their customers’ use of the $86T ACH Network, has been talking about for years: the rise of Credit-Push Fraud (CPF).
Credit-Push Fraud occurs when malicious actors exploit gaps in organizations’ sophistication or operations to access their deposit accounts and then push out deposits to fraudulent accounts, from which the funds are quickly transferred, in order to prevent claw backs. By “organizations” we mean customers of banks that banks permit to initiate fund transfers (business payments, Wires, ACH, etc.). It’s those customers that are the targets and victims of social engineering, identity theft, RTP fraud, and vendor impersonations. CPF is rapidly evolving as fraudsters learn new techniques to dupe customers or penetrate their systems, and rapidly move funds. But the key piece that’s missing in the conversation is: how do we shore up those gaps in customers’ sophistication and operations?
It’s bank customers – organizations like your local school district, doctor’s office, pet supply store….all of them, without differentiation by sector, size or geography – that are now the frontline of fraud prevention. To fraudsters, they’re the front door of the bank, and we need to focus on the customer to close that door.
What is Credit-Push Fraud?
In 2022, Nacha said a new type of fraud had eclipsed debit fraud as the predominant threat to bank account holders. Debit Fraud involves debiting funds from a customer’s or organizations’ bank account without obtaining proper authorization from the account holder. For a long time it was Nacha’s main focus, and most of Nacha’s Rules and official Guidelines address this fraud. Many of the tools the industry developed for fraud prevention were designed for debit fraud, including transaction monitoring, measuring return rates, etc. Those are still important tools (debit fraud still exists), but fraudsters have adapted.
In 2022, Nacha said:
Now, however, the most significant fraud threats to bank account holders involve fraud and scams that result in money being sent out of their accounts using credit payments, including ACH credits, wires, cards, and other instant and digital payments.
They said this in an article titled, “A New Risk Management Framework for the Era of Credit-Push Fraud,” as Credit-Push Fraud (CPF) is the name for this new, pernicious trend. In the article, Nacha said that our old Framework (including those solutions mentioned above) don’t work for CPF, as fraudsters have developed techniques to circumvent them (such as masking credits to look like a customer’s normal practices). To deal with this new fraud, Nacha said we needed to evolve in two key ways:
- Better information sharing (and more information)
- “All participants” in payments must work together
To combat this fraud, we need to focus on the bank customer as the target and primary victim. For proactive fraud prevention, we both need information about their sophistication and operational gaps, and we need them to assist in monitoring for it. In other words, we need to empower the customer to be the fortified front line against fraud, while obtaining data about their operations that banks can use proactively to identify points of high risk across their customer networks.
What’s an example of Credit-Push Fraud?
There are many ways fraudsters exploit organizations’ gaps in sophistication and operations to access their deposits. As listed above, they use social engineering (phishing, vishing, etc.) to steal banking credentials, they pose as employees or vendors requesting payment to “a new bank account,” they impersonate managers (such as via business email compromise, or BEC), and increasingly use AI-generated voices for all of the above. They also use old-school penetration and account takeover. Here’s a classic (and true) example:
Fraudsters hacked into an organization and watched their payment routines. As soon as the CEO left on vacation, the fraudsters sent an email in his name to the CFO (business email compromise) saying, “My wife and I have gone on a cruise, but I need you to transfer some funds for an acquisition we just made, in three payments of $700,000 spaced one week apart. You can’t reach me, but I’ll be checking in.” Not catching the pretense, the CFO followed through.
To the bank, these were valid payment orders from their client, and the amounts and cadence were not extraordinary for the organization. By the time the CEO checked in, over $2M had been sent through a series of foreign bank accounts and was lost.
It wasn’t the bank’s mistake, but the customer, facing ruin, blamed the bank and threatened a lawsuit. Facing the prospect of reputational harm and loss of an important customer, the bank covered much of the loss.
It’s important to note: this could all have been avoided if the customer had the right practices in place—verification and dual control, not to mention training on social engineering techniques used by fraudsters.
Net effect: fraudsters take advantage of gaps in customer sophistication and processes that are invisible to their banks.
Do you have a strategy for Credit-Push Fraud?
It’s critical for your bank to begin to ask: how do we sensitize and empower customers to manage the risk of their operations, and enable bank staff to manage that remote operational risk in a proactive, targeted, efficient and effective way? As you go through this journey, Nacha’s Credit-Push Fraud Monitoring Resource Center offers relevant content and links to providers that help with these issues. Among them, LexAlign is uniquely focused on recruiting the customer into Credit-Push Fraud prevention.
To learn more about LexAlign’s role in fraud prevention, schedule a demo here.
A Practical Look at the New Nacha Fraud Monitoring Rule
A Practical look at the New Nacha Fraud Monitoring Rule
Reflecting on the Importance of the New Fraud Monitoring Rule
Co-written by Aliya Haider and Trevor Lain
Imagine walking into a bookstore and trying to find where this topic lives. Is it in the finance section, next to books on strategy? Or is it over in true crime, with stories of social engineering and fraud? Or maybe it belongs in technology and cybersecurity, where code meets crime.
The truth is, fraud risk and compliance today touch all those shelves at once. It’s about financial operations, human behavior, and evolving digital threats—all converging in ways that make Credit-Push Fraud one of the fastest-growing financial crimes.
That’s why context matters. The new Nacha Fraud Monitoring Rule isn’t just another compliance update buried deep in a rulebook. It’s a response to shifting fraud patterns that every financial institution, every business, and every participant in the ACH Network needs to understand—because it sits at the intersection of finance, technology, and trust.
Fraud Is Evolving – and Fast
In financial services, fraud never stands still. Over the past decade, financial institutions invested heavily in reducing debit fraud. Those efforts worked. But as controls tightened, criminals adapted, shifting their focus to a type of fraud that is harder to detect and even harder to recover from: Credit-Push Fraud.
Credit-Push Fraud happens when criminals convince a legitimate account holder to authorize a payment under false pretenses—often through schemes like Business Email Compromise (BEC). The transaction looks legitimate because the account holder “approved” it. By the time the fraud is discovered, the funds are often long gone, having passed through multiple accounts, often across international borders.
For businesses and their financial institutions, these schemes are devastating. Fraudsters target operational vulnerabilities like remote work environments, insufficient dual controls, and employees unfamiliar with intrepid social engineering threats. The result is not just financial loss but also customer distrust, reputational damage, and potential litigation risk for financial institutions.
The Regulatory Response – A Call Upon All Participants
Years ago, recognizing these emerging threats, Nacha took action. In 2022, it called for “a New Risk Management Framework” to strengthen fraud resilience across the ACH Network. A key principle of that framework was simple but profound: fraud prevention is no longer just the FI’s job—it’s everyone’s job.
The ACH Network is vast, and its participants include banks and credit unions, Third-Party Senders, Originators (often businesses), and service providers. Fraudsters exploit the weakest link in this chain, and often that weak link is not the FI itself but the business customer, who controls the security and compliance of its ACH originations. Nacha’s answer: bring those customers into the fraud prevention effort explicitly.
The New Nacha Fraud Monitoring Rule
The new Fraud Monitoring Rule (Subsection 2.2.4) requires non-consumer Originators and Third-Party Senders to establish and implement risk-and role-based processes and procedures to identify unauthorized or fraudulently induced transactions and review and update those processes at least annually to adapt to evolving fraud risks.
This rule isn’t just regulatory housekeeping. It represents a strategic shift: fraud monitoring is now a formal duty for parties beyond the bank. Every participant has a defined role in spotting and mitigating fraud.
Banks Still Hold the Ball
For banks, particularly Originating Depository Financial Institutions (ODFIs), this doesn’t mean liability is shifting away. In fact, Nacha has made clear that the new rule does not change the ODFI’s fundamental responsibility for transactions originated through its systems. Banks must still ensure their customers—Originators and Third-Party Senders—comply with Nacha’s rules.
The implication is clear: financial institutions need visibility into their customers’ compliance practices and must verify that customers have appropriate fraud monitoring controls in place. Relying solely on contractual agreements or one-time onboarding assessments isn’t enough when fraud patterns evolve so quickly.
Why Now, Who Cares?
The answer is straightforward: because fraud has changed, and the rules must follow. Credit-Push Fraud attacks take advantage of operational gaps at the business customer level. Nacha’s rule closes some of those gaps by ensuring that all non-consumers upstream of the ACH Operator are actively monitoring for fraud.
For FIs, this means moving beyond minimum compliance toward proactive oversight of customer operations. Tools like automated compliance self-assessments, remote customer risk scoring, and self-guided fraud monitoring programs are becoming essential.
This isn’t just about checking a regulatory box. It’s about protecting the integrity of the ACH Network, safeguarding customer trust, and reducing systemic fraud risk.
LexAlign introduces Security for Electronic Banking Self-Assessment
Helping banks’ business customers self-assess and manage their security risk.
AUSTIN, Texas – April 19, 2023 – LexAlign PBC, a leading provider of solutions that empower frontline fraud defense, announced today the introduction of a new product—Security for Electronic Banking Self-Assessment. For the first time, financial institutions can, with minimal staff effort, do a meaningful audit and help not just a select few but all of their commercial customers better protect themselves from the kinds of devastating attacks that are increasing every year.
“Electronic banking has moved financial activities outside the security of the banks’ walls to their remote business customers. Unfortunately, fraudsters are taking advantage of these customers to the tune of billions of dollars per year, making the millions of dispersed sites where SMBs do electronic banking the new frontline for fraud,” stated Trevor Lain, Founder and CEO of LexAlign. “We see this as a two-sided information problem. On the one side, SMBs lack access to the expertise to understand the rules, risks, and responsibilities that apply to their banking activities and where their operational gaps are. On the other side, banks lack visibility and data they need to both measure and manage the risks posed by their SMB customers. We created LexAlign to solve this problem, empowering both banks and their customers to manage the risks of fraud, money laundering, and mistakes.”
Strictly following applicable regulatory guidance, LexAlign’s Security for Electronic Banking Self-Assessment helps banks’ business customers identify their security gaps and provides detailed guidance on how to remediate them. It also acts as a training vehicle for educating them on the risks and recommended practices. Performing such a self-assessment is reasonably required by law or the customer’s banking agreement. This new Self-Assessment is critical for all business customers doing electronic banking and is also an essential component of an RDC and ACH risk management program.
The Security for Electronic Banking Self-Assessment is LexAlign’s second product, a Self-Assessment for Remote Deposit Capture (RDC) was released in 2021. A Self-Assessment for ACH is under development with a planned release in late summer 2023.
By providing an automated way for banks to identify and remediate gaps in, and train, their business customers while empowering them to help themselves, LexAlign replaces the need for on-site audits and training and has been called the “missing piece” in AML and fraud risk management.
About LexAlign PBC
LexAlign makes it possible for banks to monitor and manage the risk of business customer financial activities, addressing an issue that costs banks and their most valuable customers billions of dollars annually. LexAlign automates customer compliance and security audits, education, and support so that Risk Management is proactive, targeted, efficient, and routine—enabling financial institution staff to focus on growth, not compliance. To learn more about the products offered by LexAlign, please visit https://lexalign.com/.
LexAlign introduces Remote Deposit Capture (RDC) Self-Assessment
Helping banks’ business customers self-assess and manage their RDC risk.
AUSTIN, Texas – April 30, 2021 – LexAlign PBC, a leading provider of solutions that empower frontline fraud defense, announced today the introduction of its first self-assessment for treasury products and services focused on Remote Deposit Capture (RDC).
Regulators expect banks to manage the risk presented when customers handle basic banking activities like digital check deposits. Fraud and mistake lead to huge costs for banks and their customers. Reg CC was recently revised to make clear that banks that offer RDC are responsible for all network costs created by their customer. Despite best efforts, banks struggle to measure and manage such remote operational risk at scale.
“Today, highly trained, and hard-to-hire treasury staff spend a huge amount of time on arduous and non-scalable manual processes: those used to manage the substantial risk of costly fraud and customer mistakes associated with a financial institution’s treasury products and services”, stated Trevor Lain, Founder and CEO of LexAlign. “This is a massive opportunity cost, not to mention a chore without obvious benefit for both staff and customers. By automating those tasks and reducing the time spent per customer from several hours to a few minutes, the LexAlign solution enables substantial improvements in back-office operations, customer compliance monitoring and support, customer experience, and ultimately the financial institution’s back office efficiency ratio.”
The Remote Deposit Capture Self-Assessment helps banks’ business customers identify their gaps and provides detailed guidance on how to remediate them while providing the bank with visibility into the operational risk of each of its commercial customers.
By providing an automated way for banks to identify and remediate gaps in, and train, their commercial customers while empowering them to help themselves, LexAlign replaces the need for on-site audits and training and has been called the “missing piece” in AML and fraud risk management.
About LexAlign PBC
LexAlign makes it possible for banks to monitor and manage the risk of business customer financial activities, addressing an issue that costs banks and their most valuable customers billions of dollars annually. LexAlign automates customer compliance and security audits, education, and support so that Risk Management is proactive, targeted, efficient, and routine—enabling financial institution staff to focus on growth, not compliance. To learn more about the products offered by LexAlign, please visit https://lexalign.com/.