The only type of ACH deposit that our risk area wants to accept for the first deposit on a new account is a direct deposit. I am arguing that we either accept ACH credits or not. We cannot refuse an ACH credit simply because it is not labeled direct deposit. Correct?
Thanks,
Michelle

Define initial deposit.

Even if you wanted to, could you? Our ACH credits are a specific trans code, and we wouldn't be able to identify if it were a direct deposit (or recurring) or not.

I'm going to wager a guess that we have an online opening process and we are trying to mitigate our risk from fraudulent funding of an account or money mule activity.

Here's the thing. Certainly there is risk of my personal internet banking credentials being hacked and the perps opening an account at your bank and funneling funds from my account through it. However, this can just as easily happen in a corporate account takeover setting. A school district has their internet banking credentials hacked and bogus direct deposit batches created and sent to a new account.

The question we need to be asking from a risk based perspective is whether your bank is functioning as the RDFI or the ODFI for new account funding and that's the missing piece I do not have from your question.

Thank you all. To clarify:
This is from an RDFI perspective. New customer opens an account and wants to fund from another FI. Our risk area does not want to permit our customers to log into the OLB of that FI and initiate the deposit to us; they want the customers to use our OLB. If they do not want to do that, they only option they have is to have their direct deposit sent to the account.

My point is, we cannot only accept payroll deposits. If the customer logs into the OLB of the other FI and initiates an ACH credit, we have to accept don't we?

We have an online account opening option, and we allow our customers to fund the account with a debit or credit card, transfer from an account at our institution, or transfer from another institution. We don't require direct deposits (although it usually leads to customers moving their direct deposits to us).

I can't image how or why we would want to contractually limit the source of an ACH, nor how or why we would try to devote valuable human resource time to policing this requirement. Besides that, NACHA rule 3.1.1 require that we accept all ACH transactions that comply with the NACHA rules.

I also find it curious that this is coming from the risk department. The bank has far greater risk of fraud losses acting as an ODFI than it does as an RDFI. If I use your online banking account to debit funds at another bank to fund my account with you, the rightful account owner whom I stole money from at another bank has 60 days from that transaction to come screaming back at you as unauthorized. In the meantime, I am long gone with you bank's money.

Thank you, Brian C. This is exactly what I have been saying. I just needed confirmation.
I appreciate the time.
Have a nice holiday season!
Michelle

I think you would have a very difficult time monitoring this activity to determine if it was originated via your bank or another bank, much less if it was a "direct deposit" of payroll funds. and honestly, why would you? from my bank's perspective, we have seen much more attempted fraud on online account open (OAO) where our "new customer" initiates a debit to an external account to fund their account here. and yes, most of the time they are long gone before that claim of fraud comes back to us (confirming Brian's C's point). even with fraud detection on the OAO piece, some still get through.

Most banks that allow funding of accounts from external sources (if you are the bank that is originating the transaction) will require proof that the external account is actually owned by the consumer. They will initiate a small credit to the external account (some less than a dollar) and then consumer has to confirm the deposit amount prior to opening the external account for transfers to the bank, That is what they are probably driving for. Otherwise, I open an account, I have an account number and R/T and transfer funds to the new account from the external account and I am long gone before anyone realizes that I don't own or control the external account.