Remote Deposit Capture

Remote Deposit Capture (RDC), the digital processing of paper checks and monetary instruments at remote locations for deposit and clearing through the check (image) or ACH networks, has expanded rapidly in recent years and is being used at financial institutions and at customer locations. See www.ffiec.gov/pdf/pr011409_rdc_guidance.pdf for FFIEC Guidance on Risk Management of Remote Deposit Capture.

Although remote deposit-taking is not a new activity, RDC should be viewed as a new delivery system and not simply as a new service.  Prior to implementing RDC, senior management should identify and assess the legal, compliance, reputation, and operational risks associated with the new system.  They should ensure that RDC is compatible with the institution's business strategies and should understand the return on investment and management's ability to manage the risks inherent in RDC.  Management should incorporate their assessments of RDC systems, including products and services, into existing risk assessment processes.

With RDC, the depositary and collecting financial institutions may choose either to send or accept a substitute check or to engage in electronic check presentment (ECP) where data and images captured from the original checks are used to complete payment transactions.  RDC includes deposit capture at the financial institution's teller line and backroom processing, at ATMs, and at customer locations.  RDC at customer locations allows the customer to make deposits by scanning items on its own premises and sending either the image of the deposit item for processing through the check clearing networks  or merely the deposit data for processing and clearing through the ACH network.  RDC also may include the electronic capture of deposit information comprised of cash or other items such as electronic deposits made through a remote safekeeping arrangement at the customer location or through another intermediary.

Financial institutions have a greater degree of control over RDC activities deployed at wholly owned or controlled locations.  Based on the RDC configuration used and on the customer's operations, RDC at a customer location increases the financial institution's legal, compliance, and operational risks to varying degrees.  Legal and compliance risks could be significant depending on the effectiveness of controls and legal agreements that are in place.    The use of RDC by international correspondents' customers is increasing.  RDC is effectively replacing correspondent cash letter pouch activity.  BSA/AML controls over RDC pouch activity should also cover RDC and should be commensurate with the increased volumes.  Operational risks at the customer location include unauthorized access to technology systems and electronic data images, an inability to maintain system compatibility with financial institution systems, ineffective controls over physical deposit handling and storage procedures, inadequate record retention programs, and exposure to money laundering and fraud.

The Management Booklet of the IT Handbook and the FFIEC Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual See www.ffiec.gov/bsa_aml_infobase/default.htm. provide additional descriptions of risk management processes.

 

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