Validation designed to address RDC indemnity claims for duplicate items from multiple workflows
Billerica, MA, July 3, 2018 – OrboGraph, a premier developer and supplier of intelligent electronic/paper automation solutions in recognition solutions, image validation and check fraud detection for the U.S. check processing market, as well as healthcare revenue cycle management, announces the planned release of Restrictive Endorsement (REE) as a part of OrboAnywhere Platform. REE is designed as a new tool for financial institutions (FI) and corporate depositors to address RDC indemnities and check fraud risk.
With the July 1, 2018, Regulation CC Amendments now active, financial institutions offering remote deposit capture (RDC) and mobile remote deposit capture (MRDC) can better protect themselves and their clients from duplicate item indemnity claims by requiring and validating the presence of a restrictive endorsement consistent with an RDC or MRDC deposit. Additionally, financial institutions can utilize REE to stop teller and ATM check deposits which include RDC or MRDC endorsements.
Per the FEDERAL RESERVE SYSTEM, 12 CFR Part 229, Regulation CC; Docket No. R-1409, RIN 7100-AD68, “The Board believes that this indemnity provides an appropriate incentive for the bank providing remote deposit capture services to take steps to minimize potential fraudulent deposits.”
Duplicate check deposits continue to be a point of risk for financial institutions for a variety of scenarios:
- Customer scans a check(s) through RDC or MRDC, then deposits the paper check via another channel, i.e. ATM or teller line
- Fraudsters scan check image(s) via RDC/MRDC at initial FI, then deposits paper check at a second FI
- Fraudsters deposit check image(s) via RDC/MRDC to multiple FI’s
- Fraudsters deposit check image(s) via RDC/MRDC, then cashes the checks at a money services business
To address a wide range of endorsement layouts and scenarios, OrboGraph has deployed its AI and Deep Learning Technology to address a range of restrictive endorsement layouts, including “For Deposit Only”, “For Mobile Deposit Only”, “For Remote Deposit” as well as identifying MRDC check boxes on the back of the item. Initial performance levels surpass 90% successful accuracy detection, with continual improvements expected.
The release schedule for REE will begin on July 16th, where the software will be available for testing on OrboGraph’s Owhere Test Cloud for business partners, system integrators, RDC vendors and financial institutions. The Owhere Test Cloud will enable companies to verify the performance of REE and run tests on image samples to identify percentages of RDC/MRDC deposited items with and without restrictive endorsements. REE will be packaged as a part of the Anywhere Validate.
Although Reg CC changes are now active, there continues to be debate in the industry related to the exact verbiage and approach for legal protection in the event of a disputed indemnity claim. For example:
- Many RDC and MRDC FI’s require “For Deposit Only” language today, but many times depositing consumers and corporate depositors do not follow these requirements. Additionally, this language does not indicate an RDC or MRDC channel deposit.
- Placing the name of the FI within the endorsement via stamp or by handwriting is a recommended practice by many in the industry.
- Virtual endorsements will not provide protection to indemnity claims as they are not printed on the physical check.
- Check boxes for mobile deposit, now more popular in the endorsement area of checks, is a gray area for protection. Various attorneys reference that Reg CC Amendment has no documentation related to check boxes, while others believe that course cases may support RDC Indemnity protection.
“We have been assessing the markets needs since 2017 for the new Reg CC Amendments,” stated Joe J. Gregory, Vice President of Marketing at OrboGraph. “The legal framework was actually put in place to empower a second depositary bank to pursue reimbursements of funds in the event of duplicate deposits, except when a restrictive endorsement is present. Although the law was written around the paper deposit, it’s also a legal tool protect the RDC and MRDC bank. However, each bank will make their own decision on deposit agreement requirements based on their perceived risk of duplicates, as well as whether their corporate clients would comply with a restrictive endorsement mandate for RDC and MRDC deposits. There is significant interest by FI’s who wish to educate their clients on the benefits of a proper endorsement.”
OrboGraph (www.orbograph.com), a subsidiary of Orbotech, is a premier developer and supplier of intelligent electronic/paper automation solutions in healthcare revenue cycle management (RCM), as well as recognition solutions, payment negotiability and check fraud detection for the U.S. check processing market. The company mantra, “intelligent payment automation,” describes how intelligent technologies are applied so payment posting becomes an automated process and information is accessed and analyzed via a variety of business intelligence, analytics and user interface capabilities. Nearly 4,000 financial institutions, service bureaus, clearinghouses and billers rely on OrboGraph technology to process billions of checks, EOBs, correspondence letters and claims annually.
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