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ACH Operations and Risk Management Quiz

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Questions and Answers

Which of the following is a risk that an ODFI may face when processing ACH debits?

The financial institution fails to comply with NACHA rules

The ODFI does not establish policies, procedures, and limits

The RDFI allows the debit to overdraw its customer's account

The originating account has insufficient funds (correct)

What type of businesses are considered higher risk for an ACH operation?

Gambling and adult entertainment firms (correct)

Technology and healthcare organizations

Financial institutions and government agencies

Retail and manufacturing companies

What should an ODFI's policies clearly state about ACH customers?

The impact of ACH transaction risk on liquidity

The types of businesses and customers that are acceptable (correct)

The volume of uncollected ACH transactions

The creditworthiness of its customers

What should an ODFI conduct for its originating customers to manage risk?

Thorough due diligence Signup and view all the answers

What should an ODFI establish and periodically review for its customers?

ACH exposure limits Signup and view all the answers

What should an RDFI establish to mitigate its credit exposures?

Prudent overdraft and funds availability policies Signup and view all the answers

What does noncompliance with Regulation E expose a financial institution to?

Litigation and civil money penalties Signup and view all the answers

Why should operational risks be managed closely in ACH activities?

Due to the highly automated nature of ACH activities Signup and view all the answers

Which organization(s) have clear expectations that financial institutions will manage ACH risks?

NACHA, the Reserve Banks, and EPN Signup and view all the answers

How can the risk of fraud be mitigated in ACH operations?

All of the above Signup and view all the answers

When does the ODFI incur credit risk for ACH credit entries?

Upon initiating the entries until its customer funds the account Signup and view all the answers

When does the RDFI incur credit risk for ACH credit entries?

When it grants funds availability to its customer prior to the final settlement of the credit entry Signup and view all the answers

When does the ODFI incur credit risk for ACH debit entries?

When it grants funds availability to the originator Signup and view all the answers

How can financial institutions control ACH risks?