PAR/WACHA Tips of the Month
Question of the Month
Q. An IRS tax refund posted to one of our new accountholders via ACH yesterday. The accountholder came in today requesting to wire out the full amount of the refund. As we were looking at it today, we realized that the name in the ACH entry for tax refund is not our accountholder’s name. Now we are feeling uneasy about sending this wire out. Can we be liable for this transaction? What should we do?
A. First, your financial institution is not liable for an IRS tax refund sent through the ACH network to an erroneous or fraudulent account, because the IRS provided the incorrect account information (whether it was given to them incorrectly by the taxpayer, or it was fraud).
Second, it was fine that you first allowed the IRS tax refund to post by account number only to your accountholder; however, since you have now “become aware” of the misdirected payment you are now required to notify the government of the error. You can satisfy this requirement by returning the ACH credit to the IRS with the return reason code R03-No Account/Unable to Locate Account.
Government Payment Exception Handling Cards
Newly updated for 2015, these handy cards contain the information you need to process your federal government payment exceptions. They provide a simple and quick way to lookup the required information from The Green Book: A Guide to Federal Government ACH Payments and Collections. Government Payment Exception Handling Cards are durable for your desktop and provide critical information right at your fingertips regarding:
- Posting and Returning Federal Government Benefit Payments
- Death Notification Entries (DNEs)
- Reclamations and Liability
- Tele-Trace/ Non-Receipt
- Federal Tax Refunds
*$25.00 price is for PAR/WACHA Members, Non-member price is $50.00
How often do I need to have an ACH Risk Assessment done?
The NACHA Operating Rules & Guideline state that a Participating DFI must:
- Conduct, or have conducted, an assessment of the risk of its ACH activities.
- Implement or have implemented, a risk management program on the basis of such an assessment; and
- Comply with the requirement of its regulator(s) with respect to such assessment and risk management program.
There is no specific requirement on how often you must perform or review your ACH Risk Assessment; management of your institution should implement a schedule within your risk management program.
Having said that, once you perform your Risk Assessment it is recommended you review it annually. You should conduct a new Risk Assessment anytime a major change is made to your operations. Some examples would be;
- You start originating
- You change core processors
- You experience a large turn over in operations staff
- You on board a Third Party Senders
You can have a new Risk Assessment done even if the prior one was done less than a year ago.
PAR/WACHA can conduct an ACH Risk Assessment for you right along with your Annual ACH Audit. We also have an ACH Risk Assessment Guide for you to purchase.
For more information on PAR’s Audit Services, contact us at the PAR office at (262) 345-1245 or email us at firstname.lastname@example.org