Topics of Note from AAP Handbook Rules, Regs & Risk Flashcards
An ACH network agreement strives to:
o Define the parameters of the relationship between the two parties
o Identify processing requirements for the specific application
o Establish liability and accountability for procedures related to certain applications
Relationships between the consumer as a receiver and the RDFI are governed by:
o Reg E
o The NACHA Operating Rules
o The deposit agreement
Participating ACH DFI’s, TPSP’s and TPS’s must retain proof of the completion of the annual audit of compliance and documentation supporting completion must be retained for __________ from the date of the audit.
six years
The enforcement mechanism for the ACH Network
The National System of Fines
Outlines the rules enforcement procedures to the be applied in the event of a rules violation
Appendix Nine of the NACHA Operating Rules
Details ACH arbitration procedures
Appendix Eight of the NACHA Operating Rules
Established the basic rights, liabilities and responsibilities of consumers who used EFT transfer and the FI’s that offer it
Electronic Funds Transfer Act of 1978
The Electronic Funds Transfer Act applies only to:
Consumer pymts (It does not apply to corporate EFT.)
Reg E requires that statements be sent _________for all accts that have ACH activity. If no ACH activity is present, statements can be sent ______________.
monthly, quarterly
Reg E covers ACH point of sale transactions (debit cards), but error resolution is handled by ____________
a card issuer and consumer (I.E. PSCU, not LFCU)
Customer must be given a _________________ if POS unauthorized transaction claim investigation is not completed
provisional credit
An FI may take up to ______________ to complete a POS investigation
45 days
An electronic transfer of money from a US consumer to a person or business in a foreign country
remittance transfer
The _________________ falls under Reg E Subpart B and is intended to protect consumers who send money electronically to foreign countries
Remittance Transfer Rule
A “person” (entity) that provides remittance transfers for consumers in the normal course of business. (ex credit unions, money transmitters, brokers)
Remittance transfer provider
remittance transfer rules do not apply to companies that consistently provide ___________ remittance transfers each year and they are not considered a remittance transfer provider.
500 or fewer
A consumer has ____________ to cancel a remittance transfer and refunds must be made in full within _______________.
30 minutes, three days
Sender has _______________ to report a remittance transfer error and remittance transfer provider has to resolve within _____________
180 days, 90 days
A remittance transfer correction must occur within _______________ when resolution is found
one business day
Report of results of a remittance transfer investigation must be done within ________________ after completing investigation.
three business days
remittance transfer record retention is ________________
two years
The structure of UCC 4A reflects certain consistent policies that recognize particular characteristics of wholesale funds transfers including:
o The higher dollar amount of wholesale credit transfers (high risk)
o The speed at which transfers are affected
o The cost affecting wholesale credit transfers
o The sophistication of the parties to wholesale credit transfers
The Rights and obligations under Article 4A are based on acceptance of a _________ to which the ___________ is addressed
payment order
These items are NOT covered by UCC4A:
Checks or other debit transfers, including ACH debit
Some provisions of UCC4A ______________ be altered by agreement
cannot
Provisions that can be altered by UCC4A may be overruled by provisions of _____________________________
the NACHA Operating Rules
Under UCC4A, an ___________ is generally not liable to an ODFI for an unauthorized entry allegedly transmitted to the ODFI by the _________________ unless an agreement is made that a commercially reasonable level of security is agreed upon by the originator and that is altered
originator
________________’s critical BSA function is the collection, maintenance and analysis of date on suspicious transactions through suspicious activity reports (SARs).
FinCIN
In 2021, the FRB adopted the ________________ “ample reserves” framework
Federal Open Market Committee’s (FOMC)
The Federal Reserve has reduced reserve requirements ratios to __________________.
zero percent
Allows depository institutions to suspend enforcement of transfer limits, although it is not required.
“ample reserves” framework
NACHA operating rules reflect the _________________ principal, and more importantly ____________________ principal
Know your Customer (KYC), Know your Customer’s Customer (KYCC)
Requires FI’s to have a Customer Identification Program (CIP)
USA Patriot Act
The foundation for controlling ACH credit risk is accomplished by:
establishing a credit monitoring system by which corporate customers can be evaluated.
Participants in the ACH payment system can reduce fraud risk in two ways:
o Reduce the chance that fraudulent activities could take place in the organization
o Increase the likelihood that any attempted fraud will be detected promptly
Establishing ____________________ can be an effective tool for monitoring and controlling risk.
an ACH operational control group
The goal of a __________________ is the resume business as quickly and fully as possible.
disaster recovery plan
A vital part of any risk control program should be:
contingency plans designed to handle exception conditions.
The most important aspect of consistent ACH pymt processing is the effect delays have on:
o Customer relations
o Credibility of the involved financial institutions and the originator
o Other legal obligations
NACHA supports data security policies that include:
o A commitment to use the ANSI ASC X9 Standard for authentication
o Key management
o Encryption for maximum confidentiality
