RMAG Best Practices for Risk & Exposure Management: Part 5

Posted August 23, 2017

Earlier this year the NACHA Risk Management Advisory Group (RMAG) conducted a survey of the methodologies used by Originating Depository Financial Institutions (ODFIs) to manage ACH risk in their client portfolios.  The intent of the survey was to use the results to develop educational materials and best practices for ODFIs to consider as they manage their client portfolios. This is the fifth and final article in a series of five articles. In this article, we discuss the recommended best practices for Balance Files & Off-Us Settlement:

  1. When possible your financial institution should provide the off-set transaction to either a debit or credit origination files. This gives your institution control over what account is used for settlement.
  2. If balanced files are processed, review to make sure that the off-set transaction is an on-us transaction. Balanced files that make use of an off-us off-set transaction create additional risk for the ODFI since the off-set transaction may be returned.

Our research found that many client and service provider software application packages automatically provide balanced files to the ODFI. Since this would likely require a significant software change the result has been that many clients have been “grandfathered” in by the ODFI, even when financial institution’s policy calls for the offset to be created by the institution. At many institutions accepting balanced files is generally discouraged and considered a policy exception for new clients.
As we reach the end of this 5 part series on “RMAG Best Practices for Risk & Exposure Management” we have included links to the four original articles and to a presentation of the survey results.

The final question of the survey was a general comment question about “is there anything else that you would like to comment on” and we received a number of very good responses. One of the most concise responses was one that simply said: “Know your Originators patterns and practices. Monitor them on a regular basis, and not just when something goes wrong”.

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