In our blog post on September 4, 2012, we talked about several risk factors for merchants, banks and mobile RDC users. One of the key points of recent interest was the process of managing deposited checks for a period of time before they are destroyed or shredded; or as defined in the FFIEC guidelines, “appropriate technology and process controls should be implemented at both the financial institution and the customer’s location to address operational risk.”
So what are many merchants doing with checks that are deposited? Besides franking and endorsing the items which minimizes the risk of the item being re-deposited, the checks are supposed to be stored in a secure location for 7 to 60 days, depending on the customer agreement, industry and risk factors of the merchant.
Are you comfortable most of the merchants are properly storing and protecting these items?
Below are several thought-provoking points which could reduce the risk and streamline the process:
- Most companies using RDC (large and small) have means of temporarily locking up truncated paper checks, but it’s the SYSTEM TO DETERMINE DESTRUCTION of the items after the Bank’s prescribed retention period that poses the problem operationally. In other words, the client has a hard time determining which check stack/file to shred and when. In most cases, the RDC client would find it EXTREMELY difficult to locate the source document (if needed within retention period).
- Bank merchant RDC site visits – paper check retention standards are all over the board to non-existent. Would FI’s like to have a consistent, deployable solution to help ensure retention/destruction compliance? A solution that could be bundled with a scanner?
- Merchant RDC – Automating the process for managing check retention/destruction logs. Would FI’s like a truncated check retention system that would integrate with the risk management component of the RDC software? In other words, users sign off in the software that scheduled destruction of the appropriate items has taken place and this information (date, user, items, etc.) is passed to an electronic log accessible by the user and the Bank to aid in RDC Audits and Bank Exams.
- Commercial Mobile RDC – How is the mobile user to manage temporary paper check retention in the field? This factor is a primary reason commercial mRDC will be slower to market than retail mRDC. Likely higher check volumes, imaging most likely done in field (as opposed to at home or office), mRDC cannot provide for franking of the checks, etc. The operational risks involving the paper checks are elevated with commercial mRDC.
We found a neat little product called RDCheckTrack offered by FireKing that addresses many of these points. It’s a very cost effective way to properly manage deposited checks. We’d encourage you to check this concept out! In doing so, “dreading the shred” will be gone forever!