WEB CASH MANAGER ACH PAYMENTS REFERENCE GUIDE

WEB CASH MANAGER

Contents

ACH Training for Originators ... 3

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General Setup and Workflow ... 11

Add a Database ... 12

Edit Database Entries ... 15

Approve Database Changes ... 15

Create Batches ... 16

Check Totals and Run Reports ... 18

Release Batches ... 20

Unrelease Batches ... 21

Export A Database ... 22

ACH Training for Originators

The Automated Clearing House (ACH) Network

The ACH network is an electronic payment network that moves money and information from one bank account

to another through direct deposit/payment transactions for consumers, businesses and government entities. The

ACH network is a batch processing system in which financial institutions accumulate ACH transactions

throughout the day for later batch processing.

The National Automated Clearing House Association (NACHA) has been the self-regulating entity that

provides the operational rules and guidelines for executing transactions in the ACH network.

How the ACH Network and ACH Payments Work

In general, an ACH transaction is a batch-processed, value-dated, electronic funds transfer between an

originating and a receiving bank.

An ACH credit transaction is originated by the accountholder sending

funds (payer), while an ACH debit transaction is originated by the accountholder receiving funds (payee).

Within the ACH system, these participants and users are known by the following terms:

 Originator. An organization or person that initiates an ACH transaction to an account either as a debit or credit.

 Originating Depository Financial Institution (ODFI). The Originator’s depository financial institution that forwards the

ACH transaction into the national ACH network through an ACH Operator.

 ACH Operator. An ACH Operator processes all ACH transactions that flow between different depository financial

institutions. An ACH Operator serves as a central clearing facility that receives entries from the ODFIs and distributes the entries to the appropriate Receiving Depository Financial Institution. There are currently two ACH Operators: FedACH and Electronic Payments Network (EPN).

 Receiving Depository Financial Institution (RDFI). The Receiver’s depository institution that receives the ACH

transaction from the ACH Operators and credits or debits funds from their receivers’ accounts.

 Receiver. An organization or person that authorizes the Originator to initiate an ACH transaction, either as a debit or credit to

an account.

 Gateway. A financial institution, ACH Operator, or ODFI that acts as an entry or exit point to or from the United States. A

formal declaration of status as a Gateway is not required. ACH operators and ODFIs acting in the role of Gateways have specific warranties and obligations related to certain international entries. A financial institution acting as a Gateway generally may process inbound and outbound debit and credit transactions. ACH Operators acting as Gateways may process outbound debit and credit entries, but can limit inbound entries to credit entries only and reversals.

When you initiate a payment through First Hawaiian Bank (ODFI), the entry is sent to the ACH operator, who then distributes it to the receiving banks (RDFI)for action on the account of the receiver. On the settlement date, funds are transferred between your account and the receiver’s account at the participating banks.

ACH Rules, Regulations and Legal Framework

There are rules and regulations that govern ACH transactions. The following are the primary rules/regulations that impact ACH operations:



NACHA – ACH Rules (

www.nacha.org

)

The ACH Rules define the obligations and liabilities of each financial institution, including information

regarding audit requirements and instructions on how to handle errors and returns. The rules help to

reduce risk and financial loss.



Electronic Funds Transfer Act (EFTA) and Regulation E -

(

http://www.consumerfinance.gov/eregulations/1005

)

This regulations establishes the consumer rights related to electronic funds transfer services. Reg E also

defines the responsibilities of financial institutions regarding disclosures, stop payments, and

unauthorized debit transactions on consumer accts and provides the process for resolving errors.



Office of Foreign Assets Control (OFAC) - (

http://www.treasury.gov/resource-center/sanctions/Pages/default.aspx

)

The US Treasury Department administers OFAC regulations which provide economic sanctions and

programs that prohibit US citizens and business from engaging in any activity with targeted foreign

countries, individuals and entities.



Uniform Commercial Code Article 4A – (

http://www.capitol.hawaii.gov/hrscurrent/Vol11_Ch0476-0490/HRS0490/HRS_0490-.htm

)

The section covers certain funds transfers, including ACH credit transactions not subject to EFTA and

also addressed the ‘commercially reasonable security procedures’ that must be in place for ACH

origination to occur.



USA Patriot Act – (

http://www.ffiec.gov/bsa_aml_infobase/pages_manual/olm_011.htm

)

These regulations relate to detecting and report money laundering and terrorist financing in the financial

system. A key element to an effective compliance program is the Customer Information Program (CIP).

This requires financial institutions to obtain and maintain information that is used to verify an entity or

person’s identity.



Title 31 Code of Federal Regulation Part 210 – (

http://www.ecfr.gov/cgi-bin/text-idx?rgn=div5&node=31:2.1.1.1.8

)

These regulations define both the rights and liabilities of all entities involved in conducting ACH

transactions; government agencies, Federal Reserve Banks, financial institutions, and pubic. The

regulations cover ACH credit entries, debit entries, and entry data that an agency starts or receives

through the ACH system.

Types of ACH Transactions

There are two basic types of ACH transactions:

1. Commercial – Entities originated by the private sector, including state and local governments.

a. Direct Deposit via ACH – These are credit transactions that place funds into a consumer’s

account. Typical credit transactions include payroll, travel reimbursements, government benefits,

tax and other refunds, annuities and interest payments.

ACH Applications

ACH Authorizations

Originators must obtain authorization from or provide notification to a Receiver prior to initiating ACH

transactions. Authorization requirements differ among the types of ACH transactions, also known as SEC

codes. The Originator must keep copies of the authorizations for two (2) years from the termination or

revocation of the authorization.

Authorizations must be readily identifiable as an ACH credit or debit authorization and must contain terms that

are clear and readily understandable. For recurring payments only, revocation language must also be included.

ACH Returns

ACH Notice of Change (NOC)

A NOC is a non-monetary entry transmitted by an RDFI to notify you that new or previously valid information

contained in a posted entry has been changed. The change may be due to outdated or erroneous information.

There are various NOC Codes that are used to define the various reasons for the errors. The table below

provides examples:

ACH Security Requirements

ACH rules have established data security requirements for all ACH transactions. Any banking information,

which includes but is not limited to an entry, entry data, routing number, account number, PIN or other

identification symbol must be:

1. Encrypted, at a minimum to 128-bit RC4 encryption technology or

2. Transmitted via a secure session that provides a level of security that, at a minimum, is equivalent to

128-bit RC4 technolgy.

Security requirements also require companies to establish, implements, and update, as appropriate, policies,

procedures and systems with respect to the initiation, procesing and storage of Entries that are designed to:

a) Protect the confidentitality and integrity of Protected Information until destruction

b) Protect agains anticipated threats or hazards to the security or integrity of Protected Information until

destruction, and

c) Protect against unauthorized use of Protected Information that could result in substantial harm to a

natural person.

Protected Information is non-public personal information, including finanical information, of a natural person

used to create, or contained within, and Entry and any related Addenda Record.

Refer to Appendix A for handout from FCC on Ten Cybersecurity Strategies for Small Businesses.

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ACHTERMS AND FEATURES

The definitions below describe features and terms for ACH transactions. Databases

Databases lets you group, store and re-use ACH transaction information, such as employee payroll details. You set up your system by creating a Database for each type of payment you will use. Each Database contains a single entry for each transaction and is based on a single application and company.

Companies

Depending on how your account was set up by First Hawaiian Bank, you may have more than one company to choose from when creating a new database. Companies contain the offset transaction information for your payments. In a payroll transaction, the offset is the resulting debit to your account for the credits to your employee’s accounts. Effective Date

The effective date is the settlement date for transactions. This is the date when funds are transferred between bank accounts within the Automated Clearing House. You assign an effective date when you create transactions with the Create Batch function or when you set up a database to create transactions automatically with the frequency function. Holiday Table

ACH transactions are not processed on bank holidays. The Holiday Table provides a list of holiday dates when First Hawaiian Bank does not process transactions. Though you can create and release transactions on these dates, you cannot assign effective dates for those dates listed in the Holiday Table. To view the Holiday Table, click on Setup on the Service Menu, then click on the View holidays on which services do not process hyperlink.

Applications

Applications are the different types of payments you make. You select an application when you set up a database. Each application has its own data entry screen for adding database entries.

Batches

Batches are groups of transactions with assigned effective dates. You create batches from databases. The term ‘batch’

comes from the way the system group transactions based on the effective date and payment type you are using. Create Batch

You use the Create Batch function to create batches of transactions from your Databases. You can alternatively use the Auto-Generate Transaction feature to create batches automatically.

Data Export

General Setup and Workflow

The steps below describe a typical workflow.

1. Create Databases for each type of payment you make. Each Database can be based on a different payment type (application) and is tied to a Company (offset information). Each Database contains a single entry for each payment.

2. Edit Databases to update information that changes from payment to payment, such as amounts and effective dates.

3. Create Batches of transactions to appear on the Batch List screen. The Batch List is where transactions can be released for processing or unreleased to void a transaction.

NOTE: This step is not necessary if your database is setup with the Auto-Generate Transactions setting.

4. View Batches and Run Reports from the Batch List screen. For example, if you expect a certain total based on calculations made in a separate accounting application, you can make sure totals agree in the Batch Report prior to releasing.

5. Release Batches to First Hawaiian Bank for processing by clicking the check box next to one or more batches and click the Release button.

6.

Add a Database

The first step in setting up ACH transactions is to create a Database. Once you setup a database it can be used repeatedly. Each Database includes transaction entries that include important details that banks need to process the payment. The transaction information you enter is based on the type of payment being made.

Step 1:

 From the Service Menu, select ACH Payments. The Database List screen appears.

Step 2:

 Depress the ADD button and you will get the Add Database screen shown below.

Step 3:

 Specify how the system will handle transactions that have an effective date that falls on a holiday or weekend. The effective date is the date the transaction clears at the Federal Reserve. Select one of the following:

o The previous business day – to have the effective date fall on the previous business day. (i.e., Holiday falls on a Friday, the effective date for the transaction will be Thursday)

o The next previous day – to have the effective date fall on the next business day. (i.e., Holiday falls on a Friday, the effective date for the transaction will be following Monday)

Step 7

 Depress the Save button to create database. Message returned for a successful creation should read: “Database created: name of database”

Step 8:

 Depress the ADD button to add entries into a database. An appropriate Database Detail screen appears. The screen displayed is a sample screen shot for the Payroll setup.

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Step 9:

 Enter the required fields.

NOTE: Data entry fields may differ for each payment type. Click the HELP button for instructions on how to

complete each field. Step 10:

 When you have completed entering all the required data, click SAVE. A confirmation message appears.

Edit Database Entries

Each entry appears on a separate line with summary information which includes Name, ID Amount, Status, Credit/Debit indicator and the Hold Option to allow you to hold back payment. Use of this screen allows quick edits for the transaction amount or holding back a payment.

Step 1:

 From the Database List screen, click the hyperlink for the appropriate database. The Database Summary screen appears.

Step 2:

 Edit the Amount field, if necessary. Step 3:

 To edit detail information, click on each entry’s hyperlink. Depending on how your ACH service is set up, any Database entry changes may need to be approved.

Approve Database Changes

A Database needs approval when a user creates a new database or makes changes to an existing database or entry. Step 1:

 On the Database List, select the check box next to the database with a status of “Pending Approval”. Step 2:

 Depress the Modify Database button Step 3:

 On the Modify Database screen, depress the APPROVE button. 2

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Create Batches

Use the Create Batch function to select database entries for inclusion in a batch and eventual release.

Step 1:

 From the Database List screen, select the check box next to the appropriate database Step 2:

 Depress the Create Batch button 1

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 Leave the Transaction Options setting to the All Default.

NOTE: If you have a new database for which you have not yet created Prenotes and you do not want to create live transactions, select Prenotes Only.

Step 5:

Check Totals and Run Reports

The Batch Summary report provides you with totals for all transactions in selected batches.

Step 1:

 From the Batch List screen, select the check box next to the batch(s) for which you want to view a report. Step 2:

 Select Click the Batch Report button, the Batch Summary Report Sort Order screen appears

Step 3:

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 Depress the Display button. The Batch Summary Report will appear in a separate window.

Step 5:

 Depress the Close button to close the report window and return to the Batch List screen.

Release Batches

After you check the batch totals and run reports, you release batches to First Hawaiian Bank. When you release batches, they become available to First Hawaiian Bank for processing.

Step 1:

 From the Service Menu, select ACH Payments.

 From the Function Menu. Select ACH Batch List.

Step 2:

 Select the check box next to the batch you want to release. You may only release on batch at a time. Step 3:

 Depress the Release button. A confirmation message will appear at the top of the Batch List screen. Step 4:

 View the Status area to confirm release and acceptant by First Hawaiian Bank. Batch status changes from

“Entered” to “Release”. The status then changes to “In Process” as First Hawaiian Bank processes the

transactions and then “Submitted” when processing is completed. The Date and Time columns update as the batch status changes.

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Unrelease Batches

If you have released a batch and want to cancel the process and make the batch unavailable for bank processing, you can unrelease the batch. However, to unreleased a batch the current status must be “Released”.

Step 1:

 From the Batch List screen, select the check box next to the batch you wish to unrelease. Step 2:

Export A Database

You can export information from your database into an accounting package. Step 1:

 From the Database List screen, select the check box next to the appropriate database

Step 2:

 Depress the Export button

Step3:

 Select the appropriate File Type and depress Export Report. A message appears indicating that the export was started.

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 Click the Refresh button to refresh the screen. A hyperlink message appears indicating that the export file was created and instructing you to click on it to view or download the file.

Step 5: