Pub. 9 2014-2015 Issue 2
www.nebankers.org 12 Extraordinary Service for Extraordinary Members. T HIS TYPE OF FRAUD HAS INCREASED in recent years, as the usage of Remote Deposit Capture, com- monly referred to as RDC, has surged. RDC, which lets users scan the front and back of a check and transmit the scanned images to a financial institu- tion for deposit and clearing, has been around for more than a decade. 2 More recently, the number of financial insti- tutions offering mobile RDC services, allowing customers tomake RDC depos- its using mobile devices such as smart phones has steadily increased. A study conducted by RemoteDepositCapture. compublished inMay of this year shows that 63 percent of financial institutions currently offer mobile RDC to their customers and an additional 33 percent plan to offer it in the next 12 months. 3 Although RDC provides a valuable ben- efit to customers by letting them make deposits from virtually anywhere at any time, the benefit comes at the price of additional risks to financial institutions offering the services. Perhaps the great- est risk financial institutions have faced since RDC was first introduced is the potential for duplicate presentments, given that a customer using RDC to de- posit a check retains the original check. As in the scenario involving the Georgia football players, a customer may deposit a check at one financial institution us- ing RDC, and then deposit the original check, eithermistakenly or fraudulently, at another. COUNSELOR’S CORNER Potential New Liability for Customer Double-Dipping Alison Gutierrez , Kutak Rock LLP RDC: In March of this year, four University of Georgia football players made national news when they were arrested on charges of theft by deception for depositing checks issued by the Universi- ty of Georgia athletic department through a mobile device and then cashing the originals of the same checks at a convenience store. 1 Despite the fact RDC has been around for a number of years, uncertain- ty still exists as to whether a bank that allows its customer to make a deposit via RDC is responsible to a depositary bank that accepts the original check, in the event the depositor double-dips by depositing the check twice. In an effort to remedy this uncer- tainty, the Federal Reserve Board added an indemnity applicable to RDC in its Feb. 4, 2014, proposed rulemak- ing, which updates a 2011 proposal seeking to amend Subparts C and D of Regulation CC to facilitate the banking industry’s ongoing transition to fully electronic interbank check collection and return. 4 This indemnity would re- quire a “truncating” bank that accepts and is paid on a customer deposit via RDC, but does not receive the original check or return of the check unpaid, to indemnify a second depositary bank that accepts the original check for deposit for losses the second bank may incur in the event the check already has been paid. 5 The indemnity would allow a depositary bank that accepts deposit of the original check to recover directly from the trun- cating bank. By way of example, if a customer were to deposit a check with Bank A via RDC and then fraudulently or mis- takenly deposit the original check with Bank B, and the paying bank returns the check to Bank B as a duplicate, Bank B could recover any loss it may incur on the check directly from Bank A under the proposed indemnity. The proposed indemnity is premised on the notion that a depositary bank that receives the benefit from allowing its customers to use RDC should bear losses that may result therefrom given the depositary bank introduced the risk of multiple deposits of the same check into the depository chain. Numerous financial institutions commented on the proposed indemnity prior to the expiration of the proposal comment period on May 2, 2014. A number of commenters expressed con-
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