AAP EXAM 525 Questions with Verified Answers
RCK return deadline - CORRECT ANSWER Midnight of 2nd day following the
banking day of representment
Access Device - CORRECT ANSWER A card, code, or other means that may be used
by the consumer to initiate electronic fund transfers. This does not include
electronic devices, such as telephones, personal computers or terminals, typically
used in such transfers.
Accounts Receivable Entry (ARC) - CORRECT ANSWER A single entry debit initiated
by an Originator to the account of a Receiver based on an Eligible Source
Document provided to the Originator by the Receiver
(1) via U.S. mail or delivery service,
(2) at a dropbox location, or
(3) in person for payment of a bill at a manned location.
ACH Association - CORRECT ANSWER An association of member financial
institutions and business entities organized to develop and enhance the ACH
payment mechanism. Through the association, members receive standardized
specifications, a legal framework for the protection of participants, a link to the
nationwide ACH Network and educational programs and materials.
ACH Card - CORRECT ANSWER A card or other means of access to a Consumer
Account held by a Depository Financial Institution that is issued by an entity other
than the Depository Financial Institution or a party that has contracted directly
with the Depository Financial Institution to issue such cards or other means of
access, and can be used at the point of sale to initiate POS entries.
ACH - CORRECT ANSWER Automated Clearing House Network.
ACH Operator - CORRECT ANSWER An ACH Operator is an entity that acts as a
central facility for the clearing, delivery, and settlement of entries between or
among participating DFIs.
,Who is an ACH Operator - CORRECT ANSWER May be a Federal Reserve Bank or
an entity that executes an annual agreement with the National Association
What does an ACH Operator agree to comply with or do? - CORRECT ANSWER 1)
adhere to the NACHA Operating Rules (except to the extent inconsistent with the
policies or practices of the Federal Reserve Banks) and other applicable legal
requirements
2) execute agreements with a minimum of 20 independent Participating DFIs that
bind them to the ACH Operator's rules and to the NACHA Operating Rules (except
that a Federal Reserve Bank shall not be required to bind a Participating DFI to
any provision of such rules of the National Association that is not incorporated by
the Federal Reserve Banks Operating Circular 4 on Automated Clearing House
Items.)
What does an ACH Operator do? - CORRECT ANSWER 1) provide clearing, delivery,
and settlement services for ACH entries, as defined by the NACHA Operating
Rules, between Participating DFIs that have selected that ACH Operator to
perform ACH services (intra-ACH Operator services), and (2) exchange
transactions with other ACH Operators (inter-ACH Operator exchange)
2) process and edit files based on the requirements of the NACHA Operating Rules
3) evaluate the credit worthiness of and apply risk control measures to their
Participating DFIs
4) adhere to the Federal Reserve's Policy Statement on Privately Operated
Multilateral Settlement Systems (as applicable)
5) adhere to any National ACH Operator Performance Standards of the National
Association
Acknowledgments (ACK and ATX) - CORRECT ANSWER A non-monetary entry
initiated by an RDFI that provides acknowledgment of receipt by the RDFI of a
corporate credit payment originated using the CCD format ("ACK" entry) or the
CTX format ("ATX" entry.)
Administrative Return Rate - CORRECT ANSWER The rate at which an Originator's
or Third- Party Sender's debit entries are returned for administrative reasons
(Return Reason Codes R02, R03, or R04), as calculated by the Rules requirement
in Article Two (ODFI Return Rate Reporting Regarding an Originator's or Third-
Party Sender's Administrative Return Rate or Overall Return Rate.)
,Administrative Return Rate Level - CORRECT ANSWER 3%
Addenda Record - CORRECT ANSWER An ACH record that contains supplemental
data related to an entry. This information may be needed to completely identify
an account holder(s) or provide information concerning a payment to the RDFI
and the Receiver.
Agreement - CORRECT ANSWER A contract between entities (i.e., originating
company and originating financial institution; originating company or originating
financial institution and a Third-Party Service Provider
Third-Party sender - CORRECT ANSWER A type of Third-Party Service Provider that
acts as an intermediary in Transmitting entries between an Originator and an
ODFI, including through Direct Access, and acts on behalf of an Originator or
another Third-Party Sender. A Third-Party Sender is never the Originator for
entries it transmits on behalf of another Organization, however, it may be an
Originator of other entries initiated on its own behalf.
Algorithm - CORRECT ANSWER A mathematical process used to encode or decode
a message, or a prescribed set of well-defined rules or processes for the solution
of a problem in a finite number of steps.
ANSI - CORRECT ANSWER The American National Standards Institute is the
coordinating organization for America's federated national standards system.
Membership comes from industry trade associations and the Federal
Government. Special committees within ANSI deal with standards for bank cards
and financial communication networks.
Article 4A - CORRECT ANSWER Article 4A of the Uniform Commercial Code. This
article was developed principally to establish a comprehensive body of law for
wholesale wire transfers. However, the scope of Article 4A goes beyond wire
transfers and includes all electronic credit transfers made through the ACH
Network not otherwise subject to the EFTA (generally business-to- business credit
transfers). Its primary purpose is to explain the risks and responsibilities of the
parties to the transaction.
, ASC X9 - CORRECT ANSWER The Accredited Standards Committee group that
deals with standards involving dealings between Financial Institutions. The
standards for the security of financial messages (i.e. authentication and
encryption) are developed, maintained, and published by ASC X9 (sometimes
referred to as ASC X9 or simply X9).
ASC X12 - CORRECT ANSWER The Accredited Standards Committee responsible for
the development of uniform standards for inter- industry electronic interchange
of business transaction data. The data interchange standards consist of
transaction set standards, a data dictionary and transmission control standards.
ASC X12 is generically used to refer to the standardized format for inter-industry
data exchange (sometimes referred to as ASC X12 or simply X12).
"As Of " Adjustments - CORRECT ANSWER A procedure whereby the Federal
Reserve Bank adjusts the reserve or clearing balances required to be maintained
by a depository financial institution during a seven-day accounting period. "As of "
adjustments typically follow in response to transactions that occur when a
financial institution is closed for a midweek or non-standard holiday.
Authentication - CORRECT ANSWER The process of generating a message/data-
specific code that can be used to positively identify the sender of the
message/data, and to protect the message/data from insertion, modification,
deletion, or replay. The code is generated by the use of a confidential set of keys
and a complex mathematical algorithm (the Data Encryption Standard:DES). The
code is appended to the message/data that is to be protected. The message/data
is in a readable form. The receiver of the message will utilize the confidential key
and the DES algorithm to generate a message/data-specific code that is compared
to the code that was appended to the message/data. If the two
codes agree, then the receiver and the sender can be sure that the message/data
was unaltered. ASC standards are developed by subcommittees which are
designated by numbers i.e. ASC Xn (where n is an integer from 1 to 99).
Authentication - CORRECT ANSWER The process of generating a message/data-
specific code that can be used to positively identify the sender of the
message/data, and to protect the message/data from insertion, modification,
deletion, or replay. The code is generated by the use of a confidential set of keys
and a complex mathematical algorithm (the Data Encryption Standard:DES). The
RCK return deadline - CORRECT ANSWER Midnight of 2nd day following the
banking day of representment
Access Device - CORRECT ANSWER A card, code, or other means that may be used
by the consumer to initiate electronic fund transfers. This does not include
electronic devices, such as telephones, personal computers or terminals, typically
used in such transfers.
Accounts Receivable Entry (ARC) - CORRECT ANSWER A single entry debit initiated
by an Originator to the account of a Receiver based on an Eligible Source
Document provided to the Originator by the Receiver
(1) via U.S. mail or delivery service,
(2) at a dropbox location, or
(3) in person for payment of a bill at a manned location.
ACH Association - CORRECT ANSWER An association of member financial
institutions and business entities organized to develop and enhance the ACH
payment mechanism. Through the association, members receive standardized
specifications, a legal framework for the protection of participants, a link to the
nationwide ACH Network and educational programs and materials.
ACH Card - CORRECT ANSWER A card or other means of access to a Consumer
Account held by a Depository Financial Institution that is issued by an entity other
than the Depository Financial Institution or a party that has contracted directly
with the Depository Financial Institution to issue such cards or other means of
access, and can be used at the point of sale to initiate POS entries.
ACH - CORRECT ANSWER Automated Clearing House Network.
ACH Operator - CORRECT ANSWER An ACH Operator is an entity that acts as a
central facility for the clearing, delivery, and settlement of entries between or
among participating DFIs.
,Who is an ACH Operator - CORRECT ANSWER May be a Federal Reserve Bank or
an entity that executes an annual agreement with the National Association
What does an ACH Operator agree to comply with or do? - CORRECT ANSWER 1)
adhere to the NACHA Operating Rules (except to the extent inconsistent with the
policies or practices of the Federal Reserve Banks) and other applicable legal
requirements
2) execute agreements with a minimum of 20 independent Participating DFIs that
bind them to the ACH Operator's rules and to the NACHA Operating Rules (except
that a Federal Reserve Bank shall not be required to bind a Participating DFI to
any provision of such rules of the National Association that is not incorporated by
the Federal Reserve Banks Operating Circular 4 on Automated Clearing House
Items.)
What does an ACH Operator do? - CORRECT ANSWER 1) provide clearing, delivery,
and settlement services for ACH entries, as defined by the NACHA Operating
Rules, between Participating DFIs that have selected that ACH Operator to
perform ACH services (intra-ACH Operator services), and (2) exchange
transactions with other ACH Operators (inter-ACH Operator exchange)
2) process and edit files based on the requirements of the NACHA Operating Rules
3) evaluate the credit worthiness of and apply risk control measures to their
Participating DFIs
4) adhere to the Federal Reserve's Policy Statement on Privately Operated
Multilateral Settlement Systems (as applicable)
5) adhere to any National ACH Operator Performance Standards of the National
Association
Acknowledgments (ACK and ATX) - CORRECT ANSWER A non-monetary entry
initiated by an RDFI that provides acknowledgment of receipt by the RDFI of a
corporate credit payment originated using the CCD format ("ACK" entry) or the
CTX format ("ATX" entry.)
Administrative Return Rate - CORRECT ANSWER The rate at which an Originator's
or Third- Party Sender's debit entries are returned for administrative reasons
(Return Reason Codes R02, R03, or R04), as calculated by the Rules requirement
in Article Two (ODFI Return Rate Reporting Regarding an Originator's or Third-
Party Sender's Administrative Return Rate or Overall Return Rate.)
,Administrative Return Rate Level - CORRECT ANSWER 3%
Addenda Record - CORRECT ANSWER An ACH record that contains supplemental
data related to an entry. This information may be needed to completely identify
an account holder(s) or provide information concerning a payment to the RDFI
and the Receiver.
Agreement - CORRECT ANSWER A contract between entities (i.e., originating
company and originating financial institution; originating company or originating
financial institution and a Third-Party Service Provider
Third-Party sender - CORRECT ANSWER A type of Third-Party Service Provider that
acts as an intermediary in Transmitting entries between an Originator and an
ODFI, including through Direct Access, and acts on behalf of an Originator or
another Third-Party Sender. A Third-Party Sender is never the Originator for
entries it transmits on behalf of another Organization, however, it may be an
Originator of other entries initiated on its own behalf.
Algorithm - CORRECT ANSWER A mathematical process used to encode or decode
a message, or a prescribed set of well-defined rules or processes for the solution
of a problem in a finite number of steps.
ANSI - CORRECT ANSWER The American National Standards Institute is the
coordinating organization for America's federated national standards system.
Membership comes from industry trade associations and the Federal
Government. Special committees within ANSI deal with standards for bank cards
and financial communication networks.
Article 4A - CORRECT ANSWER Article 4A of the Uniform Commercial Code. This
article was developed principally to establish a comprehensive body of law for
wholesale wire transfers. However, the scope of Article 4A goes beyond wire
transfers and includes all electronic credit transfers made through the ACH
Network not otherwise subject to the EFTA (generally business-to- business credit
transfers). Its primary purpose is to explain the risks and responsibilities of the
parties to the transaction.
, ASC X9 - CORRECT ANSWER The Accredited Standards Committee group that
deals with standards involving dealings between Financial Institutions. The
standards for the security of financial messages (i.e. authentication and
encryption) are developed, maintained, and published by ASC X9 (sometimes
referred to as ASC X9 or simply X9).
ASC X12 - CORRECT ANSWER The Accredited Standards Committee responsible for
the development of uniform standards for inter- industry electronic interchange
of business transaction data. The data interchange standards consist of
transaction set standards, a data dictionary and transmission control standards.
ASC X12 is generically used to refer to the standardized format for inter-industry
data exchange (sometimes referred to as ASC X12 or simply X12).
"As Of " Adjustments - CORRECT ANSWER A procedure whereby the Federal
Reserve Bank adjusts the reserve or clearing balances required to be maintained
by a depository financial institution during a seven-day accounting period. "As of "
adjustments typically follow in response to transactions that occur when a
financial institution is closed for a midweek or non-standard holiday.
Authentication - CORRECT ANSWER The process of generating a message/data-
specific code that can be used to positively identify the sender of the
message/data, and to protect the message/data from insertion, modification,
deletion, or replay. The code is generated by the use of a confidential set of keys
and a complex mathematical algorithm (the Data Encryption Standard:DES). The
code is appended to the message/data that is to be protected. The message/data
is in a readable form. The receiver of the message will utilize the confidential key
and the DES algorithm to generate a message/data-specific code that is compared
to the code that was appended to the message/data. If the two
codes agree, then the receiver and the sender can be sure that the message/data
was unaltered. ASC standards are developed by subcommittees which are
designated by numbers i.e. ASC Xn (where n is an integer from 1 to 99).
Authentication - CORRECT ANSWER The process of generating a message/data-
specific code that can be used to positively identify the sender of the
message/data, and to protect the message/data from insertion, modification,
deletion, or replay. The code is generated by the use of a confidential set of keys
and a complex mathematical algorithm (the Data Encryption Standard:DES). The
