APRP Payment Systems 5

Question 1

What is the purpose of the 'funds availability' rules under Regulation CC in the US?

Accepted Answer

To define how quickly deposited funds must be made available to depositors by financial institutions

Answer

Regulation CC (Expedited Funds Availability Act) sets deadlines by which banks must make deposited check and electronic funds available for withdrawal.

Question 2

In payment risk management, what is 'velocity checking'?

Accepted Answer

Monitoring the frequency of transactions from a single account or card to detect unusual patterns

Answer

Velocity checking flags accounts or cards that generate an unusually high number of transactions in a short period, which is a common indicator of fraud.

Question 3

What distinguishes 'gross settlement' from 'net settlement' in payment systems?

Accepted Answer

Gross settlement transfers full face value of each transaction individually; net settlement transfers only the difference after offsetting opposing obligations

Answer

In gross settlement, each transaction settles individually and immediately (e.g., Fedwire); in net settlement, obligations are offset and only net positions are transferred at day-end.

Question 4

Which of the following best describes a 'correspondent banking' arrangement as it relates to cross-border payments?

Accepted Answer

An arrangement where a bank holds accounts at another bank to facilitate international transactions on its behalf

Answer

Correspondent banking allows financial institutions without direct relationships to route international payments through a correspondent bank that maintains accounts in both currencies or jurisdictions.

Question 5

What is a 'return code' in the ACH system and when is it used?

Accepted Answer

A standardized code that an RDFI uses to inform the ODFI why a transaction could not be processed

Answer

ACH return codes (e.g., R01 Insufficient Funds, R02 Account Closed) are standardized codes used by the RDFI to return entries it cannot post and explain the reason.

APRP - Accredited Payments Risk Professional Practice Test

APRP - Accredited Payments Risk Professional Practice Test

APRP Payment Systems 5