ACH Operations for the ODFI Flashcards
How many topics need to be included in ODFI/Originator Agreement?
six
What are the Six topics that need to be included in ODFI/Originator Agreement?
- Authorize ODFI to transmit Entries for Originator
- Bind Originator to ACH Rules
- Mandate compliance with US Laws
- Restrictions on types of ACH Entries originated
- Right to terminate/suspend agreement for breach of ACH Rules
- Right to audit compliance with agreement and rules.
How many topics need to be included in ODFI/TPS Agreement?
Seven
What topic is included in the ODFI/TPS Agreement but not the ODFI/Originator Agreement?
TPS entered into agreement with originator that includes six topics before
origination begins.
What agreement states that entries will be transmitted through the ACH Network?
The agreement (UCC4A)
What agreement states that credit given to RDFI is provisional?
The agreement (UCC4A)
What agreement states that RDFI is entitled to a refund?
The agreement (UCC4A)
What agreements states the choice of law?
The agreement (UCC4A)
What agreement should specify how ODFI will be covered against losses due to error or failure of Originator/TPS?
Settlement and Funding Agreement
General ODFI Warranties
Entries…
- authorized by Originator/TPS Receiver
- comply with the Rules.
- not transmitted on behalf of suspended Originator/TPS.
- contain required information. ( including proper SEC code)
- Credit Entries put into network in a timely manner.
- Debit entries satisfy obligation or corrects error
- transmitted securely.
- Verification of identity of Originator/TPS using Unsecured Electronic Network.
for TPS and Nested TPS this should be implemented before originating ACH Entries..
Formal ACH Risk Assessment program
Which parties are required a Nacha Audit?
TPS and Nested TPS
A program placed on reducing payments system risk by banking groups/regulators
Risk Management Program
Must establish exposure limit for which parties?
- Non - Consumer
- Originator
- Third Party Sender
ODFI Risk Management Establishes procedures to…
- Monitor origination and return activity across multiple Settlement Dates.
- Enforce restrictions on types of entries that may be originated.
- Enforce exposure limits.
Types of Risk ODFI May encounter
- Credit
- Operational
- Fraud
- Third-Party
- Foreign Echange
- Systemic
- Reputational
Party to the entry cannot provide necessary funds as contracted in order for settlement to take place.
Credit Risk
Period of time between initiation of ACH credit file and Originator funding account.
ODFI Exposure Credit Risk
How many days is an Exposure credit risk?
0-2 Days
Date funds are available to Originator until debits can no longer be returned by RDFI
- Two banking days for NSF/Uncollected Funds
- 60 Days+ from settlement date for unauthorized/revoked
Risk that entry is altered or delayed due to unintentional error
Operational Risk
Risk that Entry will be initiated or altered in attempt to misdirect or misappropriate funds
Fraud Risk
Risk to ODFI can occur if TP is allowed to bypass ODFI when sending entries to correspondent that processes for ODFI or when sending directly to ACH Operator.
Third-Party Risk
rate can change before entry is returned
Foreign Exchange Risk
Risk that inability of one funds transfer system participant to
settle its commitments causes other participants to be unable to
settle its commitments
Systemic Risk
May result in adverse publicity and potential loss of business
Reputational Risk
Is a processing option that requires ODFI to receive origination files from originator/TPS, and to transmit files directly to its ACH Operator.
In-house processor
Is any unaffiliated person, company, or entity that performs services for a company. They are paid for their services, but do not have a stake, share, or equity in the company.
Third-Party Service Provider
What are the three types of ODFI Risk?
- Settlement Risk
- Fraud Risk
- Operational Risk
What is a formal risk assessment process?
Identify the hazards.
Decide who might be harmed and how.
Evaluate the risks and decide on control measures.
Record your findings and implement them.
