Since the implementation of Check 21, the industry has seen exceptions caused by duplicates: within the banking system first from Substitute Checks and later from image exchange and today from customers through Remote Deposit Capture. All financial institutions are interested in decreasing the number of duplicates today while more efficiently handling those duplicates that do occur. The handling of duplicates is in many ways related to the legal considerations including the warranty against duplicate presentment.  The challenge is how to do so in today’s image exchange environment. Duplicates can originate from various sources and through numerous channels and being able to prevent the duplicate item at the source or detect the duplicate prior to posting is key to minimizing customer impact and financial institution risk. 

RemoteDepositCapture.com is hosting  2 Webinars plus a dedicated "In-Depth" session at the RDC Summit to help the industry address this issue.

In addition, we hope the industry will engage in a discussion here on these forums to share ideas and information, ask questions and ideally work together to find a solution to this issue.

Please post your questions / issues here. Thank you-

In a recent webinar focus upon Mobile RDC, we received many questions about dealing with duplicates. While many of these questions will be addressed in our Dealing with Duplicates webinar and session series, we've posted a few questions below to kickstart the discussion:

1. "If the member deposits the check through RDC with your FI and then presents it to another FI who is liable? The Bank Of First Deposit?"
2. What is an industry average for the % of duplicates identified?
3. What are some of the best ways to ID duplicates and prevent them from customer deposits?
4. What is the industry-standard way to handle duplicates? As an adjustment, or as a return?
5. Do I need to compare / include ACH items in my duplicate detection process? If so, why?
6. Which input streams should be a part of duplicate detection?

Please share your thoughts / answers / insights and ask more questions!

Here are a few helpful documents, provided by our friends at ECCHO, addressing the various issues of Duplicates:

1. Avoid Duplicates! A 4-page document covering the basics of Law, Reconverting Bank & Receiving Bank roles and responsibilities. Download the pdf by clicking here.
2. A Guideline Document on Duplicate Image/IRD Prevention and Detection. Download the pdf by clicking here.
3. Resolving Duplicates as Adjustments vs Returns. Download the pdf by clicking here.

This is only my opinion but here’s what I think.  I’ll admit I don’t have a solution but I have some suggestions. I’m talking about mobile deposit not branch or teller capture. I work for a credit union, we’ve been offering mobile deposit for over a year.

There is Technology available that can detect duplicates being deposited through multiple channels at your own FI.  That is here now and will be improving over time.  That is an issue, but the bigger issue is detecting the duplicates NOT being presented at your FI. You might be the second or third presenting FI. What then?

The white papers ECCHO present are fine but deal mostly with mistakes made by an individual or by a FI who accidentally presents twice using branch or teller capture. It does not really deal with the issue that we are facing with those individuals who “knowingly” deposit the same check image via mobile deposit to your FI along with 4 other FIs. These individuals will be referred to as BIs (Bad Individuals). These same BIs who make a mobile deposit with you can also take the paper check to a check cashing business. There is not ANY way for a FI to detect that. I don’t see technology catching up with that for a while.

So what do you do if you want to offer RDC?  First you will need to expect that you will suffer some loss and build that into your plan. You’ll need to weigh the risk along with the overall good this service provides. You have to try to know your customer. Does that always work, no.  Someone who has an account with you for as long as a year could just be waiting until you perceive them as “good” before they  start doing their “bad” stuff.

You could limit the dollar amount you allow to be deposited but your good (and bad) customers are going to be pressuring you to increase the limits. This is a cool service and people want to use it for ALL their deposits.

You can place holds on the funds but that only last for a short amount of time (Reg CC).  All the BI has to do is wait 3 days and they can withdrawal the funds. They may have already deposited and withdrawn the money multiple times at multiple FIs within a very short amount of time.

At this point I don’t see a good way to stop duplicates being deposited via RDC.  The bank of first deposit (BOFD) does not know if the check being deposited is a duplicate or not. The check image is being accepted on good faith, just as it has been for decades. My thought is the paying bank should pay the first check image presented and reject every other duplicate check presented after that. There should not be any “holder in due course” options for these types of deposits. Simple. The BOFD that processed the duplicate (unknowingly) will have to treat this as a return deposited item (chargeback). Then they MUST get this BI OFF the service. We call this “Blacklisting.”  There will be honest mistakes, and we’re willing to give a second chance but if it happens again you don’t get a third try...ok so maybe there will be some exceptions.

Until we can figure out a way to have the paper check self-destruct after it’s been imaged we have to deal with it as we have with other bad checks. This technology is new, the fraud is new, it’s only going to continue to grow unless someone very smart gets a good solution in place.  There may be an answer out there, someone may already have a good solution in place. I REALLY would like to know what it is.

While there certainly is no "Silver Bullet" to dealing with Duplicates, a multi-pronged / comprehensive approach will certainly help to minimize the occurrences and therefore minimize the risks. We have discussed, for years now, the importance of a multi-channel (Mobile, Merchant, Consumer Desktop, Corporate, Branch Teller, Branch Back-counter and in-clearings) and multi-payment type (both checks AND ACH items) approach to duplicate detection. This addresses duplicates within a single bank. See our Risk Webinar for more details.

In the Dealing with Duplicates Session #1 Webinar, the issue of holder in due course was raised. Wouldn't a physical, restrictive endorsement significantly reduce the number of these claims? -And wouldn't the ability to detect, identify and intelligently read such an endorsement significantly reduce the number of duplicates overall?

Imagine if an FI had an intelligent system which could ID and read a restrictive endorsement... if the item being deposited has such, and it was restricted to that specific FI, then the deposit could be accepted. Now the item has a physical endorsement on it, and if presented to a check casher, should not be accepted. If presented to another FI, it should not be accepted. -And if no endorsement, or ensorsed to another FI, the item would be rejected. Click Here to read the article we published on this topic over 2 years ago.

We'll post more ideas and solutions soon. Thanks for joining the discussion-

In my opinion, MICR-line matching is currently the most reliable and efficient way to identify duplicate suspects. However, this should be combined with automated methods of identifying and handling false positives, as well as confirming true duplicates. Automated dispositioning minimizes the number of suspects that require manual intervention. Some of the available methods include:

• Filtering out re-presentments through integration with the institution’s outgoing returns feed or examination of X9 addendum records
• User-defined filters to automatically disposition recurring false positives
• Business rules for automatic dispositioning of suspects by datasource, site, account, depositor, and other key payment parameters. Business rules should be available for dispositioning work both at the item and file level. For example, institutions should have the option to reject or upgrade the review priority for an entire file based on the number or percentage of duplicate suspects.
• Automatically confirming duplicate images through image analytics

CONIX is very interested in learning about any other methods that would help financial institutions improve and streamline duplicate protection processes, such as the idea of a physical, restrictive endorsement.  

If we receive a draft paid to ABC123456 and a check image paid to ABC123456 with the same exact MICR line - is this a duplicate?

There is certainly a potential duplicate situation here, but just because two items have identical MICR lines does not mean the items are necessarily duplicates.  If the intention of the account holder is to present two separate payments, these are two valid items.  If either by error or fraudulent intent the same payment is presented via two separate payment methods then there is a duplicate payment presented.

 

Each of the institutions who initiate the payment in the collection stream take the responsibility of stating that they have assured the payment is valid and that all practical safeguards have been taken to ensure that the payment is not going to be represented.  I recommend you check the exchange agreements you have with the presenting bank or the rules governing any exchange group that may be involved in your payment process, e.g. ECCHO.

As I said on LinkedIn earlier this week in regards to other risks that can arise with MRDC. One area of risk that I saw and have seen already is that some (bad individuals) have the opportunity to make multiple deposits at differing financial institutions, to get more funds than they are entitled to from one check. Locally where I am, an individual was able to use MDRC to deposit one check into five different banks and draw the funds out before the FI's caught on to what they were doing. Obviously using false names, addresses, etc.

It seems difficult for different FI's to know what checks from another FI has been or has not been deposited via MRDC before it clears. Another issue that could (and has) risen is that some FI's offer a portion of the deposited funds for immediate availability, based on the account holders current balance. Once could easily do the multiple FI deposit scheme and draw out the 'forwarded funds' and again make off with more than they are entitled to.

One possible solution for this event is a national or at least regional database among exchange partners that could support a cross-bank duplicate detection system.  The technology for this exists today, but there are bigger hurdles to overcome.  Finding a service to host such a system and getting agreements among the members to support the refusal of items are lofty goals.

In the absence of a shared database among banks, institutions who utilize day 1, multi-channel duplicate detection systems that search across both onus items and transit items certainly have an advantage.  Moving this same protection to real-time would further improve the service. The common workaround of limiting deposit availability can result in a competitive disadvantage and unsatisfied customers. Obviously just waiting for items to be returned from the paying banks presents the greatest risk.