FedACH^® Services

Tools that ratchet up your ACH risk exposure monitoring

As NACHA—The Electronic Payments Association^® (Off-site Link) moves to strengthen requirements for monitoring automated clearing house (ACH) risk by implementing the new Risk Management and Assessment Rule on June 18, 2010, we want to remind all FedACH^® customers that the FedACH Risk^® Origination Monitoring Service is available to assist them in their risk management efforts.

Strengthen your ACH risk management efforts

The FedACH Risk Origination Monitoring Service provides a two-pronged approach to managing risk. The service monitors exposure limits through debit and/or credit caps on origination — either for the entire originating depository financial institution (ODFI) RTN or for designated company IDs. It also has the ability to set these monitoring caps across multiple exposure days. Requiring monitoring diligence across more than a single day reflects a common risk management best practice.

Identify and prevent unscrupulous activity

Assigning cap limits across multiple days can provide your institution with a wider exposure period than can assignment of daily cap limits alone. While assigning a company ID a daily debit origination cap of $500,000, for example, can be a good start, allowing this company ID to originate $500,000 every day, day after day, can be another matter. In fact, kiting schemes can take advantage of just such daily limits. An unscrupulous originator can originate intentionally bad debits to generate funds on day one, originate again on day two to cover returns from day one, and so forth, in ongoing and escalating amounts. The returns could appear covered to the ODFI, because credits from the subsequent larger bad debits appear sufficient to cover the returns. Eventually, however, the debits returned exceed the funds available in the originator’s account. A debit origination cap of $500,000, for example, across multiple days could help an ODFI prevent such a situation.

The FedACH Risk Origination Monitoring Service is designed to provide exactly this level of risk management. It gives ODFIs the option of setting debit and/or credit caps across multiple exposure days, as illustrated below:

• Today, plus the past three days for debit origination
• Today, plus the past two days for credit origination

Arm designated staff with monitoring tools

Readily accessible via FedLine^® access solutions, the FedACH Risk Origination Monitoring Service puts monitoring controls conveniently in the hands of authorized staff at your institution. Once caps are set within the service, any batches that breach the caps will pend automatically for inspection and subsequent release or reject decisions. Automated e-mail notifications sent when batches pend will alert designated staff to the breach and direct them to simple-to-use FedLine Services screens for review and processing decisions. The decision — whether to release or reject the pended batch — is carried out by FedACH Services, as the operator, and requires no additional action by staff at your institution, unless they choose to re-submit a rejected batch for processing on the following day.

Learn more

To learn more about the FedACH Risk Origination Monitoring Service, register to attend a complimentary teleseminar or review the easy activation steps. If you have other questions, contact your FedACH Sales Specialist.

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