It’s that time again! Many organizations (EPCOR included) are planning for the year ahead, setting goals and making plans for a successful year.
A great way to ensure success going forward is to look back on the previous year, see what went right or wrong, and plan accordingly. As many of us are tying up those loose ends for the year 2022, we are identifying the areas we struggled in or could improve upon.
The EPCOR auditors have once again shared their top five ACH audit findings for 2022:
- Written Statements of Unauthorized Debits – During the pandemic, Nacha provided relief surrounding obtaining a signed Written Statement of Unauthorized Debit (WSUD) from Receivers. However, in the fourth quarter of 2022, that relief was rescinded. It expired on October 1, 2022, and is detailed within ACH Operations Bulletin #1-2022: COVID-Related Relief from Certain Nacha Operating Rule Provisions Will Expire on October 1, 2022. Many of the findings related to WSUDs include:
- Forms were not completed within their entirety
- Forms were not in compliance with Subsection 3.12.4, Form of Written Statement of Unauthorized Debit
- Organizations were not obtaining WSUDs
- Organizations were not indicating how WSUDs were similarly authenticated
- Origination Agreements – Whew, what a topic! Our auditors found that Origination Agreements were not being executed in accordance not only with the Rules but also with best practices and the institutions’ own policies. Some of the issues noted were:
- Security procedures not being outlined
- Originator and TPS agreements did not meet the requirements of Subsection 126.96.36.199, ODFI Must Enter Origination Agreement with Originator, or Subsection 188.8.131.52, ODFI Must Enter Origination Agreement with Third-Party Sender
- Subsidiaries were not accurately reflected within agreements
- Stop Payments – Stop Payments are an awful lot like gum stuck to the bottom of a shoe! They can be a real annoyance until you get a good process in place. The most prominent issue with stop payments is how long institutions are honoring the stop payment order. Our auditors found that many institutions were not honoring stop payment orders for the effective periods outlined within Subsection 184.108.40.206, Effective Period of Stop Payments Orders and Subsection 220.127.116.11, Effective Period of Stop Payment Orders.
- ODFI Risk Management – This audit topic specifically opens to a broader review of risk mitigation related to originating Entries into the network and the warranties ODFIs make to the other participants. We saw issues related to improper SEC code usage, inaccurate information related to Originators and their limits being reflected in documentation and an overall lack of due diligence being performed on Originators and/or TPSs.
- Returns Processing – We are all aware that as an RDFI we get the last say, formally within the ACH network, related to Returns transmitted. However, it should be noted that there are still timeframes and requirements that have to be adhered to regarding transmitting a Return properly. The top three sections deemed helpful for review within the Rules related to Returns are Section 3.8, RDFI’s Right to Transmit Return Entries, Section 3.13, RDFI Right to Transmit Extended Return Entries, and Appendix Four, Return Entries. These are the sections frequently referenced as necessary for review when a finding is identified by one of our EPCOR auditors. Our auditors noted issues related to untimely Returns, improper Return code usage and Returns being transmitted to the wrong ODFI.
Four of the five top findings were also top findings in 2021, meaning they’re continuous problems/mistakes organizations make year after year. As we plan for the year ahead, let’s remind ourselves of the importance of working to resolve identified areas of weakness to better set ourselves up for success. One quick tip to help reduce and mitigate risks would be to always have well-developed, formal procedures for all activities in which your institution engages.
For more tips and further discussion related to our top 5 ACH findings, join us for our upcoming Top 5 ACH Audit Findings webinar on February 15, where our education and audit team will work together to dissect these audit topics.
Republished with permission from EPCOR