What types of risk are associated with FedGlobal ACH Payments transactions?
Federal Reserve Operating Circular 4 and the NACHA Operating Rules stipulate the rights, obligation and warranties with respect to the U.S. payments system. Differences in the U.S. and foreign systems may pose operational risk to an originating depository financial institution (ODFI). It is important that ODFIs understand the specific risks and requirements involved in originating international payments and should consult with risk management and legal staff before originating such payments. Credit risk also exists with respect to return items, including but not limited to return time frames, which may be extended due to differences in country return requirements. The originator will absorb extended temporal foreign exchange (FX) rate exposure and extended temporal credit risk. Originators should also note that the FX spread will be applied on both the originated item and the return.
