IBA Compliance Connection

Your go to source for compliance!

We just received a call from a payroll company saying that a large deposit will be arriving in one of our business customer’s accounts tomorrow morning in the form of an ACH transaction. The payroll company says that the transaction is a fraud. Subsequently, we spoke with the issuing bank, which told us that it already has placed an order for a reversal, which we should receive at the same time we receive the deposit. We have placed a hold on the funds, which we can do for one day under the ACH rules – but should we contact our customer? We believe this large deposit would be unusual activity for this particular customer.

Sep 9, 2014

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We recommend that you inform your customer of the situation today. Otherwise, in the event that your bank does not receive the reversal order tomorrow, you would still be placing a hold on the funds, but without your customer’s knowledge.

You do not know any facts other than those asserted verbally by third parties in your phone conversations. If by chance your customer is expecting this deposit, and if your bank does not receive a timely reversal order but continues to place a hold on the funds, you could be subject to claims of liability from your customer for damages caused by the unavailability of the funds. At a minimum, in such case, you could have a serious customer relations problem.

In the more likely event (based on your conversations) that the ACH transaction is fraudulent, you should consider asking your customer to open a new account, in order to prevent future fraudulent activity of a similar nature with the same account number.