Under what condition may an RDFI limit its liability for post-death payments?

Under what condition may an RDFI limit its liability for post-death payments?

• A. All depositors are verified
• B. No knowledge of death at the time of payment
• C. Payments are always returned without review
• D. All death notifications are processed promptly

Answer: (B)

The correct answer is based on the principle that an RDFI (Receiving Depository Financial Institution) is only liable for post-death payments if it was aware of the account holder's death at the time of processing the payment. In the absence of such knowledge, the RDFI can limit its liability because it acted in accordance with standard operating procedures and did not have the necessary information to stop the payment. This underscores the importance of timely and accurate notifications regarding a depositor’s status. If the RDFI is not informed that a depositor has passed away, it cannot be held responsible for continuing to make payments. Prompt notifications of death are critical for all parties involved, but if the RDFI is unaware of the situation, it will not be held accountable for any unintended consequences. This principle helps protect the RDFI from claims related to payments made after a depositor’s death if they had no knowledge of such events.

The correct answer is based on the principle that an RDFI (Receiving Depository Financial Institution) is only liable for post-death payments if it was aware of the account holder's death at the time of processing the payment. In the absence of such knowledge, the RDFI can limit its liability because it acted in accordance with standard operating procedures and did not have the necessary information to stop the payment.

This underscores the importance of timely and accurate notifications regarding a depositor’s status. If the RDFI is not informed that a depositor has passed away, it cannot be held responsible for continuing to make payments. Prompt notifications of death are critical for all parties involved, but if the RDFI is unaware of the situation, it will not be held accountable for any unintended consequences. This principle helps protect the RDFI from claims related to payments made after a depositor’s death if they had no knowledge of such events.