Skip to content

Fraud Involving 3rd Party FI Transfer of Funds

Answered by: 

We use a Processing Agent for our online banking funds transfer to other FIs. We have a situation where our member initiated a funds transfer via our online banking to transfer funds from another FI to us. These transactions processed as usual. Now the other FI is stating it is fraud. We are trying to determine our liability (funds have already been spent and it is past the 60 days). It was our understanding that the processing agent would verify the supplied information for things like name match. Our member's name isn't even CLOSE to the individual that the other FI says the funds came from. Is this 3rd party responsible for not verifying this information or do we in fact have to pay back these funds at our loss?

What you've described sounds like an ACH debit transfer. If that is the case, and if the Receiver (at the other bank) of the ACH debit was a consumer, the RDFI has to comply with Regulation E's 1005.6 and 1005.11 with respect to its customer's complaint.

Because it has been more than 60 days since the transaction was completed, the RDFI cannot return the debit to your bank using the ACH. It does, however, have the right to require your bank as ODFI to produce within ten business days evidence that the Originator (your customer) had a legitimate authorization from the Receiver to initiate the ACH debit. You are responsible for the Originator's actions in initiating the debit through your bank. The RDFI is not responsible for checking name/account number matching, and is permitted under ACH rules to post transactions based on the account number in the ACH record.

If your bank is unable (as I imagine may be the case) to produce evidence that the Originator obtained an authorization for the debit (regardless of the Standard Entry Class used or whether a consumer's or business's account was charged), the RDFI can make a direct claim against your bank for breach of your warranty that the transaction was authorized, and can bring suit in court to enforce its claim if your bank fails to honor the claim. The RDFI could also enter a claim with NACHA against your bank for a rules violation.

First published on 5/28/12

First published on 05/28/2012

Filed under: 
Filed under compliance as: 

Banker Store View All

From training, policies, forms, and publications, to office products and occasional gifts, it’s available here:

Banker Store

hot right now

image description

Looking for effective, convenient training on a particular subject?

BOL Learning Connect offers more than 200 courses ON-DEMAND or on CD ROM from AML to Reg Z and every topic in between.

Search Topics