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Direct Deposit of Her Payroll into His Account
by John Burnett, BOL Guru
Guru Bio
Question: One of our customers with an individual account and no authorized signers is having his girlfriend's payroll direct deposited into his account. How do we monitor this to keep it from happening on other accounts? Also, how should we handle any more of her deposits into this account?
Answer: Let's start with the NACHA rules. Specifically, subsection 4.1.4 of NACHA Operating Rules indicates that you, as the Receiving Depository Financial Institution (RDFI) "may rely solely on the account number contained in [an] entry for purposes of posting the entry to [a] Receiver's account." So there is no rule requiring you to refuse these entries. However, unless you want to risk problems in the future, you simply should not permit this direct deposit to continue. You should notify your customer that you have identified transactions into his account that do not belong to him and you will be preventing any future credits of this type from posting. Then bounce the next credit, using an R03 return reason code.
The only way to prevent this sort of thing is to look at the names assigned on your system to the account number of an ACH transaction and compare them with the name included with the transaction. Your vendor may have an option available to do the checking for you. Given the volumes of ACH transactions that most banks have, the task may be too much for manual reviews, unless you rely on sampling rather than full file checks.
As noted, you are not obligated to do the name/account number comparison to comply with NACHA rules. However, knowingly permitting third parties' funds to be credited to your depositors' accounts via the ACH can cause problems. Of course, there is the obvious problem of trying to sort things out down the road when the girlfriend in your scenario has a falling-out with your customer. You should win that dust-up because of the NACHA rule, but why go through the hassle? The far more serious problem is the potential for money laundering if you have no controls over the ACH credit process.
Taken to an extreme, abuse of the NACHA rule on posting based on an account number has resulted in numerous tax refund scams in which scores of bogus tax returns have been routed to a single bank account number and withdrawn, defrauding the government.
It's my recommendation that once you are aware of a name/account number mismatch, you should act to correct it.
First published on BankersOnline.com 5/28/07, and updated 5/30/07
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