Bank fraud is not a pervasive problem for our small association clients here at HausFS, but it does happen on occasion. Fraud typically takes the form of unauthorized ACH debits or debit card charges.

Here are a few ways that condo board members can reduce the risk of fraudulent transactions and lost funds.

Do not allow the use of debit cards. We've said it before and we'll say it again. Debit cards provide easy access to your association's bank accounts. If a card is lost or stolen, funds can disappear easily. It's also not unusual for board members to mistakenly (or not mistakenly) use an association debit card for personal purchases.

Use online bill pay to pay contractors, not paper checks. When you issues a paper check to a contractor or vendor you don't use regularly, you've put your bank account information into that person's hands. They can now pull your bank account's routing and account number and use that information for unauthorized debits. When you use your bank's online bill pay, your account information is protected as most banks use a single funding account for this service that is not connected directly to your account and cannot be used for such fraud.

Look into ACH debit approval restrictions with your bank. Check to see if your bank has the option to restrict ACH debit transactions from unauthorized sources. You may be able to set preferences that allow for vendors like ComEd and AT&T to debit your account directly, but prevent any other company from doing so.  

Make sure that more than one board member has access to bank accounts and that they are reviewed regularly for any suspicious activity. The sooner any fraudulent transactions are discovered, the sooner you can take action to remedy the problem. It may be necessary to close out the existing bank accounts and open new ones to prevent further fraud.

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