Secure Exchange of Standardized Letters of IndemnityNow in Nacha's Risk Management Portal

8/11/2022

Many financial institutions require a written indemnification agreement to be completed in connection with requested ACH returns. This is especially the case when the return of funds cannot be completed using an ACH return entry (i.e., an R06 Return Reason Code) or funds are returned outside the ACH Network (i.e., via wire or check). In such cases, a Receiving Depository Financial Institution (RDFI) might request that it be indemnified by the Originating Depository Financial Institution (ODFI) and that the ODFI complete and execute an indemnification agreement.

Nacha enhanced its Risk Management Portal to streamline and standardize the exchange of Letters of Indemnity (LOI). Financial institutions can now exchange LOIs electronically through the Risk Management Portal. In this secure service, an ODFI generates a Nacha standardized LOI through a secure document handling service that then alerts the RDFI of its availability. The service moves the form from the ODFI to the RDFI. No LOI is retained in the Portal itself. Don’t forget to save all LOI’s for further compliance proof.

ODFIs should first contact the RDFI to request assistance before using the LOI service. Don’t forget, the ODFI can use the ACH Contact Registry, which is also located in the Risk Management Portal, to lookup the RDFI’s contact information by inputting the RDFI’s routing number in the database. To send the LOI, registered ODFI administrators and users login to the Portal and go to the Secure Email module to begin the process of completing the LOI and selecting contacts at the RDFI.

This enhancement should cut the administrative time and effort required for sending LOIs.

For any financial institutions that have not registered the required information in Nacha’s ACH Contact Registry, please understand you are in violation with the Naha Rules, so be sure to register today because Nacha has begun enforcing Rules violations for noncompliance. Please visit Nacha ACH Contact Registry for details and for instructions on how to register.

Questions?

For more information, you can also visit the Nacha website. If you have any questions or need assistance, email paymentadvisors@saltmarshcpa.com or a member of our Financial Institutions Team so we can help.

About the Bank Advisors

The Bank Advisors at Saltmarsh have provided audit, tax and consulting services to a wide range of financial institutions since our founding in 1944, making it the firm’s largest specialty practice and industry of focus. Our Financial Institution Advisory Group has the talent, expertise and insight to help you and your institution thrive. Our team members are also industry leaders who have the knowledge and experience to provide you with unparalleled service and guidance.