14 Hoosier Banker April 2016 Continued from page 13. 1 U.C.C. §4A-204 (Unif. Law Comm’n 1989). 2 U.C.C. §4A-201 (Unif. Law Comm’n 1989). 3 U.C.C. §4A-202(b) (Unif. Law Comm’n 1989). 4 U.C.C. §4A-202(c) (Unif. Law Comm’n 1989). 5 NACHA Operating Rules & Guidelines,App. 8, Part 8.4. Part 8.4(a) provides a list of items that must be contained in an origination agreement. 6 Federal Financial Institutions Examination Council, Risk Management of Remote Deposit Capture (2009). agreement is called into question, not only regarding the customer’s obligations, but also regarding general terms and conditions that protect the bank. It is also common that a bank’s treasury management agreement does not dovetail with its deposit account agreement and/or online banking terms and conditions, and this situation likewise creates legal risk. For example if the security procedures detailed in the treasury management agreement differ from those indicated in the online banking terms and conditions, which version of the security procedures prevails? The issue may impact the bank’s ability to avoid a fraud loss under the risk allocation provision of UCC Article 4A. There is regulatory risk as well. If your bank’s treasury management agreement does not accurately reflect all services, it may fail to include provisions mandated by applicable rules. For instance National Automated Clearing House Association (NACHA) rules require, among other provisions, that a bank audit its customer’s compliance with ACH rules.5 Your bank’s treasury management agreement should expressly grant this audit right. Furthermore, the treasury management agreement, if not updated, may fail to follow recommended regulatory guidance. As an example, the Federal Financial Institutions Examination Council has issued guidance on Remote Deposit Capture6 (RDC) that recommends that a treasury management agreement contain numerous contractual provisions that address the parties’ respective roles and responsibilities, such as: procedures regarding handling and record retention of RDC information, types of items that may be transmitted, and aggregate limits on daily deposits. It is advisable to heed such guidance because today’s “recommended” guidance will likely become required within one or two examination cycles. While the architectural oddities of the Winchester House have created a tourist attraction, the drafting oddities of treasury management agreements create fraud, operational, regulatory and legal risks. By updating your bank’s treasury management agreement and by ensuring consistency with other bank agreements, you can reduce fraud losses, improve the customer experience while shortening time to revenue, and ensure legal enforceability and manage regulatory risk. t Call SHAZAM today. SHAZAM is a financial services company offering you choice and flexibility to use the products and services that meet your needs, help you stay in control of your future and allow you to compete in the market. From debit cards to core processing to marketing services and more, we deliver. Delivering Unlimited Possibilities 855-314-1212 | shazam.net | @SHAZAMNetwork
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