Funds Transfer Operations (Wire Room)

A financial institution's funds transfer operation (wire room) is responsible for originating, transmitting, and receiving payment orders. In less complex financial institutions, the wire room typically includes a FedLine PC.See the IT Handbook's, "FedLine Booklet." Less complex institutions may also have a core banking package that includes a funds transfer module, which generates payment orders in a Fedwire Funds Service format for uploading to the FedLine PC. Staff assigned responsibility for these activities are generally responsible for other duties and are not typically dedicated full-time to the wire room function. In most financial institutions, funds transfer payment order volume does not justify the costs associated with a full time staff, and the sending and receiving of payment orders may be a part-time responsibility for one or more people. For less complex financial institutions, a complete separation of duties may be difficult to achieve, and compensating controls, including rotation of duties and internal review procedures covering those payment orders requiring officer review, should be considered.

Financial institutions generating significant payment order volume usually have a separate funds transfer department with dedicated staff. Financial institutions generating a large volume of high value Fedwire Funds Service payment orders typically use dedicated funds transfer software (developed in-house or purchased) connected via computer interface to the Federal Reserve Bank's Fedwire Funds Service application. The software used for wire transfers automatically posts transactions to the demand deposit account and general ledger. The automated function provides an efficient means to process a large number of payment orders supporting a variety of business lines.

Payment orders can be received from several different sources including business areas within the financial institution, as well as from corporate and individual customers. Payment orders can be initiated by phone, fax, and online systems. Individuals wishing to wire funds typically do so at the teller window or contact their loan officer or account representative. Payment order verification is an important safeguard, and institutions should, at a minimum, keep accurate records of all payment order requests, including those initiated by telephone. Institutions should record all phone calls initiating payment orders for security and audit reasons. The institutions should maintain the tapes for at least a 30-day period.

After receiving a payment order, the wire room operator keys the payment order into FedLine (or the payment order is generated through the use of a third-party software product funds transfer module). Before sending a payment order to the Federal Reserve Bank, a second staff member should verify it for accuracy and authorization. Most FedLine PCs have two printers attached, one that prints copies of all outgoing payment order Fedwire Funds Service messages and another that prints incoming Fedwire Funds Service payment order messages. Institutions should maintain a record of all payment orders for record keeping purposes. The unbroken printout sheet helps ensure a complete record of all messages; however, institutions should also verify the sequence numbers of the messages to identify missing records due to communication problems. The sequence number provides an audit trail for all funds transfers on the Fedwire Funds Service system.

The institution should have appropriate procedures in place to verify all processed payment orders. These procedures usually include the use of code words, call backs, and corporate resolutions authorizing certain employees to send payment orders. Verification and security procedures are extremely important in light of the potential for fraud or errors.

A Fedwire Funds Service message is generated either by the application supporting the business line or by an authorized wire room employee who enters the message into an on-line terminal. Before transmitting the wire, it is sent to a second terminal for an independent employee to verify for accuracy as well as proper authorization. Only after a second staff member reviews the payment order should a financial institution send it to the Federal Reserve Bank for processing.

This separation of duties is important to ensure security. The institution's internal funds transfer system should maintain data on each day's transfers, including wires sent and received, wires listed by amount, wires listed by sequence number, and wires listed by account holder. Most software systems maintain the work of several previous days, often the last 5 to 7 days, to allow on-line access to trace errors and problems. After the 5 to 7 days, the data is typically archived.


 

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Non-automated Payment Order Origination
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Computer and Network Operations Supporting Funds Transfer