THIRD PARTY SENDER – A third-party sender is considered a third-party sender if there is an agreement with an ODFI or other third-party sender to initiate transactions and has also entered into an agreement with a principal to initiate transactions on its behalf in the ACH network. In this situation, there is no agreement between the author and the ODFI. An external sender is a subset of the third-party provider. DATA TRANSMISSION – The electronic exchange of information between two data processing points (computers). In general, an ACH transaction is an electronic money transfer processed in batches, ordered by value, between an originator bank and a receiving bank. An ACH balance transaction is triggered by the account holder who sends money (payer), while an ACH debit transaction is triggered by the account holder who receives money (payee). In the ACH system, these participants and users are known by the following terms: A third-party provider (TPSP) is a different entity from an initiator, ODFI or RDFI, which performs all functions on behalf of the author, ODFI or RDFI in connection with the processing of ACH inputs. For example, a bank may require a TPSP to perform ACH activities on behalf of the bank. 213 Third-party service provider is an umbrella term for any company that provides services to a bank.

An external payment processor is a specific type of service provider that processes payments such as checks, ACH files, or credit and debit card messages or files. For instructions, see the detailed overview section «External Payment Processors,» page 234. Nacha`s operating rules define the TPSPs and relevant subsets of TPSPs that contain «third-party shippers» and «shipping points». 214Where independent TPSPs conclude contracts with independent sales organisations or other external payment processors, there may be two or more layers between the ODFI and the initiator. A third-party sender is a type of service provider acting on behalf of a principal (i.e., an intermediary between the sender and the ODFI). For example, a third-party sender might be a customer of the bank processing ACH transactions on behalf of a sender. In the case of a third-party broadcaster agreement, there is no contractual agreement between the ODFI and the author. A sending point is defined as an entity that submits inputs to an ACH operator on behalf of an ODFI. The BSA requires banks to have in place BSA/AML compliance programs and appropriate policies, procedures and processes to monitor and identify unusual activity, including ACH transactions.

Obtaining cdd information in all trades is an important indicator of BSA/AML risk in ACH transactions. Due to the nature of ACH transactions and the trust that ODFIs and RDFIs place in each other for OFAC reviews and other necessary due diligence information, it is important that all parties have a strong fixed-term program for ACH`s regular customers. In the case of PST relationships, the TPSP TDD may be supplemented by due diligence on the part of the clients associated with the TPSP and, if necessary, the initiators. Appropriate and effective SDC policies, procedures and processes are essential to detect an unusual and suspicious pattern of activity, as individual LCA transactions are usually not verified. Equally important is an effective risk-based system for monitoring and reporting suspicious activity. In cases where a bank is heavily dependent on the TPSP, a bank may want to review the PST suspicious activity monitoring and reporting program through its own inspection or an independent inspection. The ODFI may enter into an agreement with the TPSP that establishes general tpSP guidelines, such as. B compliance with ACH operational requirements and responsibilities and compliance with other applicable state and federal regulations.

Banks may need to consider controls to restrict or deny ACH`s services to potential initiators and insolvency administrators involved in questionable or misleading business practices. The functions of these TPSPs may include, but are not limited to, the creation of ACH files on behalf of the author or ODFI, or the function of sending point of an ODFI (or receiving agent on behalf of an RDFI). Note: For companies, there must be an agreement between the two business partners. The rules do not specify what should be included in the agreement, except that both parties must be bound by the rules. . DATA ENCRYPTION STANDARD – A technique in which a message is encrypted to be transmitted in an indecipherable stream of bits. BUSINESS DAY – A day when a financial institution is open and essentially conducts all of its operations. ACQUIRING BANK – The bank or financial institution that holds the merchant`s bank account used to collect the credit card processing proceeds. UNIFORM COMMERCIAL CODE ARTICLE 4A (UCC 4A) – The Uniform Commercial Code (UCC) is a comprehensive state law that regulates trade. Article 4A covers certain money transfers, including ACH credit transactions, which are not subject to the Electronic Funds Transfer Act.

ACH is a batch process, storage and transfer system that provides stable value settlement transactions for withdrawals (credits) and collections (debits). The ACH network transfers funds electronically between accounts for consumer, business and government payments and is a safe, cost-effective and efficient alternative to processing paper cheques or bank transfers. Enterprise transactions are ACH records that are sent between businesses, businesses, and other non-consuming businesses and can contain various amounts of transfer information (addendum). .