Regulation CC and Financial Compliance

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The Regulation CC was established by the Federal Reserve and it ensures the implementation of the Expedited Funds Availability Act (1987). This act sets standard requirements for checks to be endorsed by banks or any depository institution. It ensures that financial institutions process the endorsed checks correctly, as this makes it easier to identify the endorsing banks correctly. It also requires that unpaid checks are returned to the bank immediately. Therefore it is an important best practice and must be followed to ensure financial compliance.

The Regulation RCC applies to all deposits made into accounts whether they are customer accounts or business demand deposit accounts. This best practice tool provides the customer with fair and clear guidelines, on how they can deposit their funds. Additionally, customers get to understand how these funds will be handled and credited to their accounts.

There are diverse hold times for funds that have just been deposited which depend on certain conditions. For example, the type of deposit that was made, the location of the bank at which the funds were drawn at and the amount of funds deposited. These guidelines are usually confusing and difficult to handle. This is why there usually is a problem with compliance. Approximately 70% of the staff in the front line of financial institutions misinforms customers on the hold time of the fund they deposit. This is one of the main failures in best practice which have caused banks to pay a fine. Every year approximately 11% of banks get charged for violating the Regulation CC.

The implementation of the Regulation CC is not just enough as a best practice. Financial institutions need to train their staff on maintenance and consistency of the staff in the front line to ensure financial compliance with Regulation CC. To help businesses with implementation of financial compliance best practices, there are automated front line solutions. These tackle issues with availability, execution and disclosure of the funds deposited into the bank or depository institutions.

There are four basic best practice requirements which most financial institutions fail to comply with:

1.       Provision of required information: There have to be notices and adequate information about the funds when they are available.

2.       Availability of funds for withdrawal: When local and non local checks are presented, the funds should be available for withdrawal within the time period in accordance with the regulations.

3.       Provide $100 the next day for deposits which can be avoided or may not be required.

4.       Compliance with required procedures with large deposits.

Therefore financial compliance can be achieved by implementing best practices according to the requirements of the Regulation CC.

Further reading: Corporate Governance | Audit | Performance Improvement

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