Resolved to get a better handle on risk management in the new year? Start with Third-Party Senders!
The Nacha Operating Rules (“ACH Rules”) require that ODFIs know the nature of their customers’ use of the ACH Network, whether as Originators, Third-Party Senders, or other types of intermediaries. One of the trickier aspects of being an ODFI is recognizing and understanding Third-Party Senders, the complexities and unique risks they present, and how to thoroughly mitigate those risks to protect your institution.
Third-Party Senders act on behalf of the downstream Originator. If your customer is originating entries on behalf of and for the ultimate benefit of its downstream customer (e.g., the Originator) that has the underlying payment obligation with the Receiver, it is a Third-Party Sender.
Do you know if any of your Originators are acting in this role, and if so, how do you ensure they are compliant with the rules and requirements that Third-Party Senders are subject to? There is a lot for your team to consider to limit your exposure:
- What tools or resources do you have to accurately identify Third-Party Senders and Nested Third-Party Senders?
- What departments should you involve in the identification and risk evaluation process?
- Once identified, have you registered your Third-Party Senders in Nacha’s Risk Management Portal, as required by the ACH Rules?
- Have you granted Direct Access to any Third-Party Senders, that is, the authority to transmit entries directly to the ACH Operator using your institution’s routing number and settlement account, and if so, are they properly registered in Nacha’s Risk Management Portal?
- How do you track that Third-Party Senders are fulfilling their obligation under the ACH Rules to complete an audit and risk assessment each year?
- Does your agreement with Third-Party Senders adequately address these obligations and other necessary risk controls?
This list may seem daunting, but ePayAdvisors can help you tackle it:
Consulting and Customized Education
- We can review and analyze your operational processes and Originators to identify those that serve as Third-Party Senders
- We can create customized education for your staff to explain identifying Third-Party Senders, managing the relationships, and mitigating the risks.
Third-Party Sender Audits and Risk Assessment
- We can perform the annual audits and risk assessments specific to Third-Party Senders as required by the ACH Rules.
Ready to learn more and start the new year on the right foot? Contact ePayAdvisors at 800-475-0585, Option 5, or go to epayadvisors.com.