AAP ACH Network Participants and Roles 1 — Questions and Answers
Question 1: What is the primary role of an Originating Depository Financial Institution (ODFI) in the ACH network?
- Receives ACH entries from Originators and forwards them to an ACH Operator (Correct answer)
- Only processes returned entries from RDFIs
- Settles funds directly with consumers
- Audits ACH transactions for NACHA compliance
Correct answer: Receives ACH entries from Originators and forwards them to an ACH Operator
The ODFI acts as the entry point into the ACH network, accepting entries from Originators and transmitting them to an ACH Operator for processing.
Question 2: Which entity is responsible for receiving ACH entries and posting them to Receiver accounts?
- ACH Operator
- Originator
- RDFI (Receiving Depository Financial Institution) (Correct answer)
- Third-Party Sender
Correct answer: RDFI (Receiving Depository Financial Institution)
The RDFI receives ACH entries from the ACH Operator and posts them to the Receiver's account.
Question 3: How is a Third-Party Sender (TPS) defined under NACHA Operating Rules?
- A company that transmits ACH entries on behalf of Originators through an ODFI (Correct answer)
- A federal reserve bank that clears ACH entries
- A direct customer of an ODFI with its own origination agreement
- An ACH network operator that settles transactions
Correct answer: A company that transmits ACH entries on behalf of Originators through an ODFI
A Third-Party Sender is an intermediary that transmits ACH entries to an ODFI on behalf of Originators, often providing processing services for multiple clients.
Question 4: Which two entities serve as ACH Operators in the United States?
- FedACH and EPN (operated by The Clearing House) (Correct answer)
- NACHA and FinCEN
- OCC and FDIC
- JPMorgan Chase and Wells Fargo
Correct answer: FedACH and EPN (operated by The Clearing House)
The two ACH Operators are FedACH (operated by the Federal Reserve Banks) and EPN (Electronic Payments Network, operated by The Clearing House).
Question 5: What term describes the company or individual that initiates ACH credit or debit entries with authorization from a Receiver?
- RDFI
- Originator (Correct answer)
- ACH Operator
- Third-Party Processor
Correct answer: Originator
The Originator is the entity that initiates ACH entries, having obtained proper authorization from the Receiver to do so.
Question 6: When an ODFI uses a Third-Party Sender, the ODFI must ensure the TPS complies with:
- NACHA Operating Rules (Correct answer)
- Only the state banking laws of its domicile
- IRS regulations exclusively
- The Federal Reserve Act
Correct answer: NACHA Operating Rules
The ODFI retains responsibility for its TPS relationships and must ensure all TPS activity complies with the NACHA Operating Rules.
AAP ACH Network Participants and Roles 1
What is the primary role of an Originating Depository Financial Institution (ODFI) in the ACH network?