I have always been under the impression that under NACHA rules we didn't have to compare the name on an ACH deposit to the name on the account as long as the account number matched. I read an article that basically says that, with the exception of government benefit payments. It made it seem like we have to check names for all government benefit payments. This seems like a huge undertaking and I am interested in seeing how other banks handle this.

Thanks

Does the article provide a citation? I am not aware of any federal requirements that state that you are obligated to compare names on ACH payments of government benefits to the account title.

31 CFR 210.5(a)

"an ACH credit entry representing a Federal payment other than a vendor payment shall be deposited into a deposit account at a financial institution. For all payments other than vendor payments, the account at the financial institution shall be in the name of the recipient, except as provided in paragraph (b) of this section.

(b)

(1) Where an authorized payment agent has been selected, the Federal payment shall be deposited into an account titled in accordance with the regulations governing the authorized payment agent.

(2) Where a Federal payment is to be deposited into an investment account established through a securities broker or dealer registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934, or an investment account established through an investment company registered under the Investment Company Act of 1940 or its transfer agent, such payment may be deposited into an account designated by such broker or dealer, investment company, or transfer agent.

If you back up a section, you will also find 31 CFR 210.4(a)(1)

(1) The agency or the RDFI that accepts the recipient's authorization shall verify the identity of the recipient and, in the case of a written authorization requiring the recipient's signature, the validity of the recipient's signature.

Generally the RDFI is not obtaining authorization to receive benefits, the recipient provides the account information directly to the federal agency that is paying the benefits. It is up to the agency to determine that it is sending the funds to the correct account. If you become aware that one of your customers is receiving benefits in someone else's name, then by all means start returning the items. There is no requirement here for you to verify all of your government payments.

Great. Thanks for your help!!

Current IRS guidance in support of Brian's comments. The government has its own ACH rules. At one time, they required banks to match the names on the account with the name on the ACH credit, but that was eliminated several years ago because bankers complained about it.

But be aware that if the bank is involved in setting up the direct deposit arrangement of government payments, the bank IS RESPONSIBLE for comparing the ownership of the account and the name of the benefit beneficiary. And if the bank becomes aware of a difference, it really doesn't have an option to "look the other way."

The one exception, I think, is that there's no problem under the Treasury regulation if the payment is a joint tax refund going into an account owned by only one of the taxpayers. Banks may still refuse to allow it, but IRS rules don't prohibit it -- they merely caution the taxpayers that the bnk isn't required to accept it.