Pub. 12 2015 Issue 1

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S Spring • 2015 15 Mobile Banking Deposit Restrictive Endorsement 51 % Mobile Banking apps have made banking easier than ever for customers, but accepting checks for deposit with these apps presents banks with a new set of risks. Since the individual customer remains in possession of the check when using a Mobile Banking app, there is a risk for either accidental or intentional duplicate deposits. of smartphone owners have used mobile banking in the past 12 months “ -Federal Reserve Banks allowing commercial customers to use Remote Deposit Capture (“RDC”) image machines have already dealt with similar issues in the past. Most RDC machines time stamp or otherwise mark the check as deposited, so the same check is not deposited again. Additionally, most commercial customers have internal procedures in place to prevent a check from being deposited more than once. These same controls are not in place for individual customers using Mobile Banking Deposits. In these instances, time stamps or other marks that are not automatically placed on the deposited check, and typical individual customers are unlikely to use any process to prevent accidental duplicate deposits. A bank recently disclosed a simple process they use to prevent duplicate deposits. The bank requires individual customers, as part of its Mobile Banking Deposit agreement, to place a restrictive endorsement on the check before the image is created in the Mobile Deposit process. The endorsement must read: “For Mobile Deposit Only to the account of (name-of-customer) on (date).” The bank even added a re- minder in the Mobile Banking process which asks if the check has the required endorsement. When bank staff review the check image before accepting the Mobile Deposit, they not only verify that the payee is the account owner and the amount is encoded correctly, but they also verify that the required restrictive endorsement is on the back side. The bank rejects the deposit if the required endorsement is not included and requires the customer to add the endorsement before re-depositing the check. This bank indicated most of their individual customers understood the reason for this requirement. The require- ment helps prevent customers from accidentally depos- iting the check twice, but also discourages intentional duplicate deposits since other banks are not likely to accept a check in violation of the restrictive endorse- ment. Any customer intentionally depositing the same item twice will most likely be unsuccessful in claiming it was an accident. Other possible restrictions include putting a limit on the amount of funds that can be deposited via a Mobile Banking app per month or not making Mobile Deposit funds immediately available. If your bank offers a Mobile Banking app to customers, it is important to carefully consider adopting this type of restrictive endorsement to prevent customers from being embarrassed by their own mistakes and prevent losses when checks are paid twice. by: Charles m. Towle linkedin.com/company/kbsforbanks twitter.com/kbsforbanks SECURITY OFFICER’S BY-WORD kbs blue sheet https://kbsforbanks.wufoo.com/forms/kbs access the by-word by email Call KBS (785) 228-0000 to discuss this atricle, other topics, and products to help protect your bottom line.