AAP flashcards
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- ACH Operator
- An ACH Operator is a central clearing facility, such as FedACH or EPN, that receives, sorts, and settles ACH entries between participating financial institutions.
- ODFI
- Originating Depository Financial Institution transmits ACH entries from Originators to the ACH Operator and warrants rule compliance.
- RDFI
- Receiving Depository Financial Institution receives ACH entries from the ACH Operator and posts them to Receiver accounts.
- SEC Code
- Standard Entry Class code identifies an ACH entry's payment type and required data, such as PPD, CCD, WEB, or IAT.
- Regulation E
- Federal rule governing consumer electronic fund transfers, including ACH debit error resolution, provisional credit, and unauthorized-transfer liability limits.
- Nacha Operating Rules
- The private rulebook that governs ACH entry formatting, participant warranties, returns, and settlement among financial institutions.
- OFAC Screening
- Required check that Originators, Receivers, and financial institutions are not blocked persons; matches must be blocked and reported.
- ODFI Warranty
- ODFI promises each entry is authorized and complies with the Rules, giving RDFIs and ACH Operators a basis for liability.
- PPD Entry
- Prearranged Payment and Deposit entry used for consumer credits and debits, such as payroll, pensions, and recurring bill payments.
- CCD Entry
- Corporate Credit or Debit entry used for business-to-business payments; it carries one addenda record for remittance information.
- WEB Entry
- Internet-initiated consumer debit authorized electronically; the Originator must validate account data and retain the authorization.
- IAT Entry
- International ACH Transaction used for cross-border payments; it includes foreign bank details and requires OFAC screening.
- Effective Entry Date
- Date the Originator requests settlement; the ACH Operator adjusts it if it falls on a non-banking day.
- Prenotification
- Zero-dollar entry sent to validate a Receiver's account and routing data before live entries; it does not transfer funds.
- Exposure Limit
- ODFI-set cap on the dollar value or volume of entries an Originator may originate, controlling credit and fraud risk.
- Trace Number
- Unique 15-digit number assigned by the ODFI that identifies an ACH entry through processing, returns, and research.
- Return Entry
- ACH entry sent back by the RDFI to reverse a settled entry, carrying a reason code such as R01 or R02.
- Notification of Change
- COR entry from the RDFI advising the ODFI of incorrect data for future entries; it does not reverse funds.
- Dishonored Return
- Return sent by the ODFI challenging an RDFI's return as improper or late; the RDFI may contest it.
- R01
- Return reason code meaning insufficient funds; the RDFI could not debit the account because available funds were lacking.
- ACH Kiting
- Fraud scheme exploiting settlement timing and available balances by moving funds between accounts before debits clear.
- Account Takeover
- Fraud in which stolen online banking credentials are used to originate unauthorized ACH debits or change payroll deposit accounts.
- Positive Pay
- ACH filtering control that compares incoming entries to a pre-authorized list and rejects or flags exceptions.
- Return Rate Monitoring
- Tracking the percentage and types of returns, especially unauthorized returns, as an indicator of Originator risk.
- Third-Party Sender
- An intermediary that transmits ACH entries between Originators and an ODFI and assumes origination responsibilities under the Rules.
- Third-Party Service Provider
- A vendor that supplies processing, software, or data services to ACH participants but does not itself act as an Originator.
- Nested Third-Party Sender
- A TPS that uses another TPS to reach an ODFI, increasing opacity and due-diligence risk for the ODFI.
- ODFI Due Diligence
- Investigation of a TPS's ownership, controls, Originator base, and compliance before allowing it to transmit entries.
- Same Day ACH
- ACH service that settles qualifying entries on the same banking day, with funds available by the end of that settlement day.
- Same Day ACH Limit
- The maximum dollar amount per Same Day ACH entry, set at $1,000,000 by Nacha.
- IAT Gateway
- The ACH Operator function that processes International ACH Transactions between domestic and foreign financial institutions.
- Real-Time Payments
- Payments that settle immediately and irrevocably, such as RTP or FedNow, unlike batch ACH with post-settlement returns.