RemoteDepositCapture.com

Transcription

1 RemoteDepositCapture.com This audio session was recorded at the RDC Summit Please be sure to register for future RDC Summits. Visit: Gain exposure for your organization by having a listing in the RemoteDepositCapture.com Buyer s Guide. With hundreds of thousands of unique visitors, you are sure to get noticed. Visit the Advertise with Us section of the website. Looking for a solution? Visit the RDC Solution Finder on RemoteDepositCapture.com. It s fast and free. 1

2 RDC Legal Developments Prepared by: PAUL A. CARRUBBA Phone: (601) September 27, 2012

3 Paul Carrubba Paul is a partner in the law firm of Adams and Reese LLP. His primary focus is on Banking Law and legal issues dealing with payments system laws and regulations and bank operations issues. He has over 37 years of experience in the banking industry as a Bank Operations Manager, a consultant, an author, and an attorney. Mr. Carrubba is the author of five books including: Revised UCC Article 3 and 4, A Banker s Guide to Checks and Principles of Banking. He is the co-author, with Dan Fisher, of both Remote Deposit Capture Practical Considerations and most recently, Risk Management Series Remote Deposit Capture. 3

4 Presentation Content THIS PRESENTATION IS DESIGNED TO PROVIDE ACCURATE AND AUTHORITATIVE INFORMATION REGARDING ITS SUBJECT MATTER. IT IS PRESENTED WITH THE UNDERSTANDING THAT THE PRESENTER IS NOT RENDERING LEGAL, ACCOUNTING, OR OTHER PROFESSIONAL SERVICES. IF LEGAL ADVICE OR OTHER EXPERT ASSISTANCE IS REQUIRED, THE SERVICES OF A COMPETENT PROFESSIONAL PERSON SHOULD BE SOUGHT. 4

5 Federal Financial Institutions Examination Council (FFIEC) RISK MANAGEMENT OF REMOTE DEPOSIT CAPTURE ISSUED JANUARY 14, 2009 DEPOSIT TRANSACTION DELIVERY SYSTEM 5

6 APPLICATION OF GUIDANCE SOURCE OF DEPOSIT Branches ATMs Domestic and Foreign Correspondents Commercial and Retail Customers PRINCIPLES APPLICABLE TO: RDC Mobile Banking ACH Check Conversion 6

7 RISK MANAGEMENT- ASSESSMENT RISKS Legal Compliance Reputational Operations MANAGEMENT SHOULD ENSURE Compatible with Strategies Return on Investment Ability to Manage Risk 7

8 RISK MANAGEMENT- ASSESSMENT LEGAL AND COMPLIANCE Controls Over the Process Check 21 Regulation CC Regulation J State Law Agreements and Clearinghouse Rules 8

9 RISK MANAGEMENT- ASSESSMENT LEGAL AND COMPLIANCE (Continued) Guidelines Establishing Information Security Outsourcing Technology Services Booklet Multifactor Authentication Least Cost Routing Contract Term Authorization Applicable Law Paper Check Law NACHA Rules Regulation E Bank Secrecy Act/USA PATRIOT Act/OFAC 9

10 RISK MANAGEMENT- ASSESSMENT OPERATIONAL RISKS Physical and Logical Access Controls Customer Controls Multifactor Authentication Increased Fraud Risk 10

11 RISK MANAGEMENT- MITIGATION & CONTROLS ESTABLISH RISK MANAGEMENT POLICIES CUSTOMER DUE DILIGENCE AND SUITABILITY Exclusions Customer Selection Criteria Customer Location Visits Customer Self-Assessments VENDOR DUE DILIGENCE AND SUITABILITY RDC TRAINING FOR CUSTOMERS Training Documentation 11

12 RISK MANAGEMENT- MITIGATION & CONTROLS CONTRACTS AND AGREEMENTS Roles and Responsibilities Item Retention and Destruction Acceptable Items Procedures Image Quality Customer Obligation to Produce Original or Image Periodic Audits Performance Standards for Bank and Customer Liability, Warranties, Indemnification, Disputes 12

13 RISK MANAGEMENT- MITIGATION & CONTROLS CONTRACTS AND AGREEMENTS Funds Availability, Collateral, Collected Funds Governing Laws, Regulations, Rules Customer Internal Controls Termination 13

14 DEPOSIT REVIEW REASONABLE COMMERCIAL STANDARDS DEPOSIT MONITORING DEPOSIT LIMITS Average Deposit Amount Generic Limit Item Limit Number of Files 14

15 CONTRACT PROVISIONS Hardware and Software Items Eligible For Deposit Image Quality Deposit and File Limits Deadlines & Missed Deadlines Receipt, Rejection, Acceptance of File Availability & Settlement 15

16 CONTRACT PROVISIONS Company Bound by Clearing Rules Method of Presentment of Items Lost Files and Transmissions Intrusion and Stolen Data Warranty and Indemnification Financial Criteria (Risk Assessment) Controlling Law 16

17 CONTRACT PROVISIONS Maintenance, Retention & Destruction of Original Return Items Update Customer Information Contingency Plan Errors and Discrepancies 17

18 THREE PARTY Three Party Agreement RDC to Customer Account Processor CPA Property Management Three Party Agreement RDC to Third Party Account Basic Business Terms and Conditions Indemnification Joint and Several Liability Resolution 18

19 X9.37 Image File Agreement Basic Business Terms and Conditions Method of Transmission Number of Transmissions Customer Responsibilities Coupons and Invoices/Image Lockbox Indemnification 19

20 The Question: Should Your Financial Institution Offer RDC to Consumers and Small Business? Customer Convenience Competition Advances in Technology Limited Offering to Target Market Mass Offering 20 20

21 Large Commercial Business RDC v Consumer and Small Business A Contrast In Risk Commercial Businesses Stable Physical Business Location Established Track Record Availability of Financial Information Less Likely to Commit Fraud PC and Scanner/MICR /reader Sophistication Internal Controls Small Universe 21 21

22 Large Commercial Business RDC v Consumer and Small Business A Contrast in Risk Consumer and Small Business Questionable Stability Mobile No or Limited Track Record Less Financial Information More Likely to Commit Fraud Flatbed Scanner or Mobile Device (no MICR) Less Sophisticated No Internal Controls Subject to Consumer Protection Laws Mass Market 22 22

23 Mobile RDC Legal and Regulatory Issues No Mobile Banking Law Federal Laws and Regulations State Laws and Regulations Operating Rules 23 23

24 Federal Laws and Regulations U. S. Patriot Act Bank Secrecy Act/ Anti-Money Laundering EFTA Reg E TILA Reg Z TISA Reg DD GLBA Reg P FFIEC Guidance and IT Handbooks ESIGN Licensing Requirement 24 24

25 State Laws and Regulations UCC Article 2 UCC Articles 3 & 4 UCC Article 4A Privacy Laws UETA State Banking Regulation Licensing Requirements 25

26 Operating Rules Network Rules NACHA Rules Visa/Mastercard Rules 26

27 Agreements, Contract Terms and Disclosures Deposit Account Agreement ESIGN Disclosure Applicability of TISA Disclosure RDC Agreement Amend Existing Business RDC Agreement Consumer/Small Business/Mobile Agreement Stand Alone Mobile Part of Internet Banking Agreement 27 27

28 Consumer Agreement Terms Service Description Services Included SMS Texting Bill Pay Transfers Alerts Additional Services Eligibility Security Procedures Physical and Electronic Security Bill Pay Terms SMS Texting 28

29 Consumer Agreement Terms cont. Export Control & International USR Customer will not disable security features on the mobile device Joint Accounts Transaction Limitations Limitation of Liability Rewards As Is Indemnification Reg E Language for Consumer 29

30 SOFTWARE/PROCESSOR IN HOUSE/ASP REPUTATION/TRACK RECORD CONTRACT TERMS CAPABILITIES DUPLICATE DETECTION DEPOSIT LIMITS 30

31 SERVICE PROVIDER AGREEMENTS Scope of Service Expanding Scope Payments License Monthly Fees Term and Termination Security and Compliance with GLBA Provide SSAE 16 Report Warranty and Indemnification Provide Warranty IP Infringement Compliance with Laws and Regulations - MFA Business Resumption 31

32 COMPLIANCE ISSUES Enforcement Actions (Two Banks) Risk Assessment Prior to RDC Implementation Inadequate Internal Controls and Insufficient Resources to Monitor Failure to Detect MSB and Pouch Activity Insufficient Automated Transaction Monitoring System SARs Filed US and Foreign MSB Sequentially Numbered Money Orders and Travelers Checks Presentment of Image and Original Dual Presentment of Images Counterfeit/Altered Checks Immediate Withdrawal or Transfer of Funds Check Kiting 32

33 Questions? 33

34 RDC Legal Developments September 27, 2012 Prepared by: PAUL A. CARRUBBA Phone: (601)

35 RemoteDepositCapture.com This audio session was recorded at the RDC Summit Please be sure to register for future RDC Summits. Visit: Gain exposure for your organization by having a listing in the RemoteDepositCapture.com Buyer s Guide. With hundreds of thousands of unique visitors, you are sure to get noticed. Visit the Advertise with Us section of the website. Looking for a solution? Visit the RDC Solution Finder on RemoteDepositCapture.com. It s fast and free. 35