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Automatic Withdrawal / Deposit Scam

by Ryan Guina

A current scam called the 1-cent deposit scam has been going around. This scam involves Automated Clearing House transactions. ACH is an electronic network of financial transactions. Because ACH transfers clear electronically, people are not asked to verify the transactions.

The current scam involves a company that uses a computer program to generate bank account and routing numbers. They automatically deposit $.01 into each randomly generated account. The thieves then know that each accepted transaction is a valid account which they then make withdrawals from. One of the current thieves perpetrating this fraud calls itself Equity First (see Note at bottom of page). The withdrawals they have made are all $124.90, and seem to happen near the beginning of the month. They usually tap each account once and move on, but they sometimes hit accounts multiple times.

Because these are randomly generated account numbers (I’m sure they have an accurate listing of valid bank routing numbers, which is pretty much public information) I’m not sure what defense most people have against this. This is not your normal phishing scam or identity theft.

The best defense is to regularly monitor your accounts and be aware of any recent deposits and withdrawals that you do not expect or from companies you are unfamiliar with. Most banks have an on-line guarantee, so if you spot this sort of activity and promptly report it, you may not actually lose your money permanently. However, thieves will have a valid account and routing number, so you would likely have to change your account within your bank. It’s a hassle, but well worth protecting your assets!

Note: There is a company called Equity 1st Mortgage based in Wilmington North Carolina, and only licensed to do business in NC. This is not the company perpetrating this scam, and the scam seems to be focused outside of NC. Equity 1st has received well over 100 phone calls in regard to this scam and advises people to contact their bank for further action.


Published or updated December 9, 2010.
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1 dimes

What the heck? Can’t they figure out where the charges are going and freeze them electronically?

2 Ryan

The banks can stop the charges, but until they are alerted that fraud is occurring, they do not know there is a problem. Banks handle billions of ACH transactions annually and there is no way to monitor all of them. It is the account holder’s responsibility to monitor their own account, and I personally wouldn’t want my bank to contact me every time I wanted to do an on-line transaction.

I’m sure once banks realize how a certain fraud is occurring to their bank and customers, they are quick to take action. But by then, the thieves are ready to move on and steal from other banks and customers.

As far as blacklisting certain groups or account numbers receiving these stolen funds – I’m sure these thieves regularly change them when people start catching on. It also doesn’t make too much difference if only one bank blacklists them, as there are thousands of banks out there. There would need to be a national listing for bank fraud that all banks subscribe to.

3 Ryan

Sushma,

This is actually not a phishing scam. These thieves generate random account numbers and attach them to real bank routing numbers (which they have a list of). Then they send ACH deposits to these randomly generated accounts. If if the deposit does not get bounced back, they know they have a live account from which they make withdrawals.

4 Mrs. Micah

That’s a new one on me. It makes a lot of sense, seems easier than phishing and the like (once you get it set up).

5 Ryan

Hello Mrs. Micah,

I think you’re right, It is very easy to get a list of routing numbers, then from there, the process is easy to automate. It is very important to always check your statements!

6 bill

Thanks to Check Clearing for the 21 Century Act, I would imagine this has become common place.

7 Ryan

I would hope not. The best practice to prevent this is to go over all transactions monthly.

8 Mike

What I find amazing is that the people who do these scams seem to be very clever. Some of them are bordering on genius. I know that’s probably not what you want to hear but we got to realize what we are up against. I don’t know how many times I have received scam emails that looked real. Thankfully I’ve deleted them but they seem relentless.

The lenghts these people will go to seem to be extreme.

Thanks for the heads up.

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