Remote deposit capture comes with some risks

Last updated on May 13th, 2019 at 02:45 pm

Think about how many aspects of your daily business life have been impacted by the use of the Internet. Now narrow that down to only your company’s banking transactions. The list doesn’t get much shorter.

Today, you can receive your bank statements, reconcile your account, initiate wire transfers, pay bills, review credit card activity and even apply for a loan without leaving your office. Until recently, however, you still had to make time in your hectic schedule to go to the bank to deposit your company’s daily receipts. Those days are quickly ending for many businesses.

Many business banks are introducing a new service that allows companies to convert the physical checks they receive from their customers into digital images that can be electronically transmitted to their banks for deposit. This service is commonly called remote deposit capture (RDC). While RDC can be a tremendous time-saving tool for many businesses, the service is not without risk. It is important for any business considering using this service to understand these risks, as well as the steps that can be taken to mitigate them.

How it works

The process is relatively simple. Once you have established a remote deposit capture relationship with your bank, you will be able to scan each of your deposit items (i.e., checks) into digital image files using a desktop scanner and your personal computer. The image files are then transmitted to your bank electronically.

Often, your bank will recommend the use of a particular brand of scanner that is compatible with the bank’s RDC solution. The scanner may be purchased or leased directly from the vendor or through the bank. The cost of scanners is not prohibitive (typically under $1,500).  If you purchase your scanner, however, remember that you, not the bank, will be responsible for repairing or replacing the unit if problems arise.

Legal risks

Banks are well-versed in the risks associated with processing checks. With RDC, many of these risks are shifted to you. You will need to take certain precautions to prevent loss to either you or your customers.

The most effective loss prevention measure you can take is ensuring that your company has a strong control environment in place. Because your bank is relying on you to institute such controls, it is likely that the RDC Agreement will shift all risk of loss associated with use of the service to you, unless caused by the bank’s own negligence or willful misconduct.

In a paper check environment, your bank is responsible for handling items once they have been deposited.  In a RDC environment, however, the items remain with you.  Your company could be exposed to monetary liability and/or reputation risks should these items fall into the wrong hands.  Since it is not readily apparent from the face of the check that it has been deposited electronically, the biggest risk is the intentional or unintentional redeposit of the item, either into your company bank account or your employee’s personal bank account.  By limiting access to the items and instituting strong control procedures, you can prevent many of these issues.

Your bank will likely require you to retain the items you deposit remotely for a period of time before destroying them. Keep in mind that it may become necessary to refer back to the paper check should the image file not be of sufficient quality to allow the bank to settle the item electronically. While a file may meet your bank’s image quality standards, there is no guarantee that the image quality will be up to the standards of other banks in the settlement chain.

It is possible that an item will be returned to your bank as a non-conforming image weeks after it was originally deposited.  Enough information may be available in the image file for your bank to create a “substitute check,” which may then be presented for collection. If your bank is unable to do this, however, you will need to refer back to the paper check or, if the check is not available, have your customer reissue it in order to resolve the problem.

As is often the case, technology can be a two-edged sword. RDC is no exception to this rule. If used properly, it can prove to be a valuable time-saving tool for your company.  However, you should remain aware of the added risks and take protective measures.


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