Automated Clearing House (ACH) transactions involve electronic batch-processing of transferred value-dated funds. An originating financial institution working through an ACH operator forwards the transaction into an ACH network. The receiving financial institution processes the funds into credit and debit amounts from the receiving institution's accounts. The Bank Secrecy Act requires businesses handling ACH transactions, such as casinos and banks, to monitor customer behavior and transactions. Reports need to be filed when detecting suspicious account behavior that might involve money laundering.
Monitor Customer Operations
Review documentation of ACH transactions concerning how the account was opened, including International ACH transactions (IAT) and the customer identification program. Determine if the ACH and the IAT fall within the normal operations for the type of business. Analyze the origin or destination jurisdiction, transaction frequencies and the amounts.
Determine the bank's risks concerning ACH and IAT transactions. Evaluate the bank's location, size, and the customer account relationships involving the dollar volume, types and frequency of ACH transactions. Review destination and originating location of IATs to the bank's location.
Identify customer accounts involved in large and frequent activity of IAT and ACH amounts. Track the batch-processed transactions when certain ACH amounts become placed into separate processed error accounts or are segregated for other purposes. Increase monitoring of high-risk customers with originating and receiving IAT transactions located in high-risk geographic locations, as stated by the Federal Financial Institutions Examination Council.
Review customer complaints concerning account processing. Investigate unauthorized returns pertaining to possible fraud. Track duplicate ACH and IAT transactions.
Test ACH and IAT transactions from a sampling of accounts from high-risk customers. Review accounts imitating ACH transactions when initiated over the phone or from the Internet, especially if these were the methods used when the account was opened.
Note the volume and type of ACH and IAT activities when the customer's business does not correspond with the nature of the transactions. Block customer accounts who were previously involved with duplicate and fraudulent transactions or other unauthorized activities.
Review and test all procedures of the financial institution's internal control operations. Evaluate and determine the places where operations do not follow the Board of Director standards. Correct internal controls to lessen the bank's risk and prevent fraudulent account schemes.
- bank image by Pefkos from Fotolia.com