What is the primary purpose of an ACH filter?

What is the primary purpose of an ACH filter?

• A. It matches the details of incoming payments with those on a list of expected payments provided by the account holder.
• B. It requires the bank to contact the account holder before any payments are made.
• C. It is a tool used by auditors to examine electronic payment activity on the bank records.
• D. It enables account holders to provide their banks with a list of criteria to ensure only designated individuals get paid.

Answer: (D)

An ACH filter is a protective control that lets you set criteria for outgoing ACH disbursements so only approved recipients are paid. The main idea is to have the bank screen each payment against a list of rules you provide, ensuring payments go to designated individuals or accounts and not to unknown or unauthorized recipients. You can specify acceptable payees, accounts, and sometimes limits on amounts or payment types. When a payment entry is submitted, the bank checks it against the filter and blocks or flags any entry that doesn’t meet the criteria, allowing matching payments to proceed. This helps prevent fraudulent or mistaken transfers and is commonly used for payroll and vendor payments. The other descriptions describe different functions, such as matching incoming deposits, requiring pre-authorization before payments, or serving as an audit tool, which do not capture the preventive recipient-control purpose of an ACH filter.

An ACH filter is a protective control that lets you set criteria for outgoing ACH disbursements so only approved recipients are paid. The main idea is to have the bank screen each payment against a list of rules you provide, ensuring payments go to designated individuals or accounts and not to unknown or unauthorized recipients. You can specify acceptable payees, accounts, and sometimes limits on amounts or payment types. When a payment entry is submitted, the bank checks it against the filter and blocks or flags any entry that doesn’t meet the criteria, allowing matching payments to proceed. This helps prevent fraudulent or mistaken transfers and is commonly used for payroll and vendor payments. The other descriptions describe different functions, such as matching incoming deposits, requiring pre-authorization before payments, or serving as an audit tool, which do not capture the preventive recipient-control purpose of an ACH filter.