Accredited ACH Professional (AAP) Practice Exam

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Which party is primarily responsible for controlling credit risk in the ACH Network?

  1. RDFI

  2. ODFI

  3. Third Party Sender

  4. Originator

The correct answer is: ODFI

The party primarily responsible for controlling credit risk in the ACH Network is the ODFI, or Originating Depository Financial Institution. The ODFI is the financial institution that initiates ACH transactions on behalf of its clients, which can include businesses and individuals known as Originators. Since the ODFI's role involves accepting entries from Originators and transmitting them through the ACH Network, it is in the best position to assess the creditworthiness of those Originators and manage the associated risks. By performing due diligence on the Originators, the ODFI can establish internal controls, set transaction limits, and monitor for compliance with ACH rules, thereby mitigating potential losses that could arise from fraudulent activities or the inability of Originators to fulfill their obligations. In contrast, while the RDFI (Receiving Depository Financial Institution) processes transactions and has some risk associated with receiving entries, it is not primarily in control of the risk involved in initiating those transactions. The Third Party Sender acts on behalf of an Originator but still operates under the guidance and control of the ODFI. The Originator creates the transactions but relies on the ODFI's credit evaluation and risk management frameworks. Hence, emphasizing the ODFI’s crucial role in managing credit risk