Abstract:
A system and method are provided whereby a clearing intermediary identifies replicated items (electronic check images, substitute checks, or original checks) that are received from one or more banks of first deposit by comparing unique identifiers, such as those found in the MICR line of the original check, and finding two or more matches. The unique identifiers may include the routing/transit number, account number, and check number, or other suitable identifiers.

Description:
CROSS REFERENCE TO RELATED APPLICATION  
       [0001]     This application claims the benefit of U.S. Provisional Patent Application Ser. No. 60/669,500, filed Apr. 8, 2005, and which is hereby incorporated by reference in its entirety. 
     
    
     TECHNICAL FIELD  
       [0002]     This invention relates to systems and methods for detecting checks or derivatives of original checks presented multiple times during a check clearing process.  
       BACKGROUND OF THE INVENTION  
       [0003]     Prior to October, 2004, a bank was required to present an original paper check for payment unless the paying bank had agreed to accept presentment in some other form. Sections 3-501(b)(2) and 4-110 of the Uniform Commercial Code (U.C.C.) specifically authorized banks and other persons to agree to alternative means of presentment, such as electronic presentment. However, under the U.C.C., a presenting bank would need electronic presentment agreements with each bank to which it presents checks to engage in broad-based electronic presentment. This has proven impracticable because of both the large number of paying banks and the unwillingness of some paying banks to receive electronic presentment.  
         [0004]     The requirement that banks present the original check absent agreement to the contrary, and the difficulty of obtaining alternate presentment agreements with all paying banks, impeded the ability of banks to process checks electronically. As a result, the payment system as a whole had not achieved the efficiencies and potential cost savings associated with handling checks electronically.  
         [0005]     The “Check Clearing for the 21 st  Century Act,” also referred to herein as the “Check 21 ” Act, became effective on Oct. 28, 2004. The Check 21 Act is codified at 12 U.S.C. §§ 5001-5018. Implementation of the Check 21 Act is found in Title 12, Part 229 of the Code of Federal Regulations. By authorizing the use of a new negotiable instrument called a “substitute check,” the Check 21 Act facilitates the broader use of electronic check processing without mandating that any bank change its current check collection practices.  
         [0006]     A substitute check is a paper reproduction of an original check that contains an image of the front and back of the original check, and is suitable for automated processing in the same manner as the original check. A bank that, for consideration, transfers, presents, or returns a substitute check (or a paper or electronic representation of a substitute check) warrants that (1) the substitute check contains an accurate image of the front and back of the original check and a legend stating that it is the legal equivalent of the original check, and (2) no depositary bank, drawee, drawer, or indorser will be asked to pay a check that it already has paid. A substitute check that meets the Check 21 Act&#39;s requirements, and for which a bank has made the substitute check warranties, is the legal equivalent of the original check for all purposes and all persons.  
         [0007]     The use of legally equivalent substitute checks should facilitate the check clearing process. For example, prior to the Check 21 Act, a depositary bank in California that received a check drawn on a bank in New York was required to send the original paper check for collection unless it, or an intermediary collecting bank that presents checks sent by it, had an electronic presentment agreement with the paying bank. Under the Check 21 Act, by contrast, the California bank could transfer check information electronically to a collecting bank in New York with which it had an agreement to do so. The New York collecting bank then could create a substitute check to present to the New York paying bank. The New York paying bank would be required to take presentment of the substitute check. Thus, instead of processing and transporting the original check across the country, the California bank could collect the substitute check using only local New York transportation.  
         [0008]     Substitute checks are therefore advantageous in that they enable banks to transmit electronic data representing a check, rather than a paper copy of the check during the clearing process. However, by relying on digitized check images instead of original documents, it is possible for a single check to be replicated and presented multiple times. Current industry processes would not detect replicated items caused by, for example, the same item being erroneously transmitted in multiple, different files or formats, such as when an electronic check image for an original check is transmitted multiple times or when multiple substitute checks are printed for one original check. Nor would the replicated item be detected if the item originated from two different parties. Check 21 makes both of these scenarios possible.  
       SUMMARY OF THE INVENTION  
       [0009]     A system for detecting duplicate checks during check processing is provided. The system includes at least one scanner sufficiently configured to scan original checks and substitute checks originating from a first plurality of entities and, for each of said original checks and substitute checks, generate a respective data set including a respective identifier.  
         [0010]     The system also includes at least one electronic communication link in selective electronic communication with a second plurality of entities. The at least one electronic communication link is sufficiently configured to receive image replacement document data sets in electronic form, i.e., electronic check images. Each of the image replacement document data sets contains the information necessary to prepare a respective substitute check including a respective identifier.  
         [0011]     The system further includes a storage medium storing a database of stored unique identifiers. At least one computer processor is operatively connected to the storage medium, the at least one scanner, and the at least one communication link.  
         [0012]     The at least one computer processor is sufficiently programmed and configured to, for each data set received from the at least one scanner and the at least one electronic communication link, determine whether the respective identifier is identical to one of the stored identifiers in the database. The at least one computer processor is configured and programmed to store the respective identifier in the database if the respective identifier is not identical to one of the stored identifiers in the database. The at least one computer processor is further programmed and configured to transmit a notification signal if the respective identifier is identical to one of the stored identifiers in the database.  
         [0013]     The system, being configured to receive original checks, substitute checks, and image replacement document data from multiple entities, improves upon the prior art by providing item replication detection at a macro level in the check clearing process, rather than merely at a bank of first deposit or paying bank, and, in some instances, by providing item replication detection early in the check clearing process. For example, it is contemplated that the system may be used or operated by a clearing intermediary. In the context of the claimed invention, a “clearing intermediary” is an entity that is involved in the clearing process of a check and that is neither the paying bank nor the bank of first deposit. More specifically, a “clearing intermediary” receives, processes, or transmits checks, substitute checks, or electronic check images, but it not a bank of first deposit or a paying bank.  
         [0014]     A corresponding method is also provided whereby a clearing intermediary identifies replicated items. The method includes being a clearing intermediary, receiving a plurality of checks, substitute checks, and/or electronic check images from a plurality of entities. For each of the plurality of checks, substitute checks, and/or electronic check images, the method further includes capturing a respective identifier, comparing the respective identifier to stored identifiers in a database, and determining whether the respective identifier is identical to any of the stored identifiers in the database.  
         [0015]     The method also includes notifying a third party if the respective identifier is identical to any of the stored identifiers in the database, and storing the respective identifier in the database if the respective identifier is not identical to any of the stored identifiers. Notification may be sent electronically via e-mail, SWIFT message, etc. to any of the following possible recipients: depositing party, third party processor, drawn-on bank, payee, payor or other parties involved in the clearing process. 
     
    
     BRIEF DESCRIPTION OF THE DRAWINGS  
       [0016]      FIG. 1  is a schematic depiction of a first check clearing scenario wherein a clearing intermediary receives checks, subsitute checks, and electronic check images from banks of first deposit and presents checks or substitute checks to paying banks;  
         [0017]      FIG. 2  is a schematic depiction of a system for detecting duplicate checks;  
         [0018]      FIG. 3  is a flow chart depiction of a method and exemplary control logic for the system of  FIG. 2 ;  
         [0019]      FIG. 4  is a schematic depiction of a second check clearing scenario wherein a lockbox provider receives checks and transmits checks, substitute checks, or electronic check images to another clearing intermediary, and transmits deposit data to banks of first deposit; and  
         [0020]      FIG. 5  is a schematic depiction of a third check clearing scenario wherein an outsourcing provider receives checks, substitute checks, or electronic check images from banks of first deposit, and transmits checks, substitute checks, or electronic check images to another clearing intermediary. 
     
    
     DESCRIPTION OF THE PREFERRED EMBODIMENTS  
       [0021]     Referring to  FIG. 1 , a first check clearing scenario is schematically depicted. Payors  10 A- 10 I send or present checks to payees  14 A- 14 I as understood by those skilled in the art. The payee of each check deposits the check at a selected bank  18 A- 18 C, i.e., a “Bank of First Deposit” (BOFD). The BOFDs  18 A- 18 C are distinct legal entities and are separately-owned. The BOFDs may or may not be within the United States within the scope of the claimed invention. In the embodiment depicted, BOFD  18 A receives checks from payees  14 A- 14 C; BOFD  18 B receives checks from payees  14 D- 14 F; and BOFD  18 C receives checks from payees  14 G- 14 I.  
         [0022]     Each check has a unique set of characteristics, including information contained in the magnetic ink character recognition line (commonly referred to as the “MICR line”), which represent unique identifiers for that check. The specific information/unique identifier for the check includes, but is not limited to, the routing/transit number of the drawn-on (paying) bank, the payor&#39;s account number at that bank, and the check number.  
         [0023]     For each check received, the BOFDs transmit an item comprising one of (a) the original check; (b) an electronic image of the check, i.e., an electronic data set representing the information required to prepare a substitute check; or (c) a substitute check to a clearing intermediary  22 . Advantageously, the BOFD may scan or otherwise process an original check to obtain the electronic image, and transmit the electronic image (instead of an original paper check) to the clearing intermediary. Exemplary clearing intermediaries include the Federal Reserve Bank, a correspondent bank, a check clearinghouse, etc.  
         [0024]     The drawn-on banks  26 A- 26 D, also referred to herein as “paying banks,” typically receive a check or a substitute check from the clearing intermediary  22  for each of the items transmitted by the BOFDs. The drawn-on banks then, under normal circumstances, debit the account of the payor of each check as understood by those skilled in the art.  
         [0025]     Referring to  FIG. 2 , wherein like reference numbers refer to like components from  FIG. 1 , a system  28  for detecting duplicate checks during check processing is schematically depicted. The system  28  includes at least one scanner  30  sufficiently configured to scan original checks and substitute checks originating, or received, from a first plurality of entities, i.e., BOFDs  18 A-C. The system also includes at least one electronic communication link  34  in selective electronic communication with a second plurality of entities, which, in the embodiment depicted, includes BOFDs  18 A-C and paying banks  26 A-D. Within the scope of the claimed invention, a “first plurality of entities” and a “second plurality of entities” may or may not include common entities. Thus, for example, a first plurality of entities and a second plurality of entities may be identical, may have common entities, or may have no entities in common with one another.  
         [0026]     The system  28  also includes a storage medium  36  storing a database  38  of stored identifiers. Within the scope of the claimed invention, a “storage medium” may or may not include multiple storage media. Thus, for example, a “storage medium storing a database” may include, within the scope of the claimed invention, several storage mediums each storing a portion of the database. The system  28  also includes at least one computer processor  42  that is operatively connected to the scanner  30  and the communication link  34  to receive data therefrom. The computer processor  42  is also operatively connected to the storage medium  36  to transmit data thereto and receive data therefrom.  
         [0027]     The scanner  30 , communications link  34 , processor  42 , and database storage medium  38  are depicted in  FIG. 2  as being parts of, or operated by, the clearing intermediary  22 . However, and within the scope of the claimed invention, the system  28  or any part thereof may be located or maintained by another entity. For example, the database storage medium may be located at and maintained by another entity besides the clearing intermediary  22 , but accessed by the computer processor  42  of the clearing intermediary or the computer processors of multiple clearing intermediaries.  
         [0028]      FIG. 3  is a schematic depiction of a method that may be advantageously employed by the clearing intermediary  22 .  FIG. 3  also represents an exemplary control logic for the system  28  of  FIG. 2 . Referring to  FIGS. 2 and 3 , the clearing intermediary  22  receives items  46 A- 46 I from the BOFDs  18 A- 18 C. For example, BOFD  18 A may transmit items  46 A- 46 C, BOFD  18 B may transmit items  46 D- 46 F, and BOFD  18 C may transmit items  46 G- 46 I.  
         [0029]     Items  46 A,  46 B are original checks bearing a respective MICR line  48 A,  48 B. Items  46 C,  46 D are substitute checks (also sometimes referred to as “Image Replacement Documents” or IRDs), each bearing a respective MICR line  48 C,  48 D identical to the MICR line of the original check from which the substitute check was created. Items  46 E- 46 I are image replacement document data sets (IRD data sets) each containing information, in digital electronic form, necessary to print a substitute check. The image replacement document data sets  46 E-I are sometimes referred to as “electronic check images.” Each of items  46 E- 46 I includes electronic data  48 E- 48 I representing the information from the MICR line of the original paper check from which the electronic data set was prepared.  
         [0030]     The clearing intermediary  22  then performs a data capture wherein the clearing intermediary obtains or “captures” an identifier from each item  46 E- 46 I at step  52 , typically the MICR line or data representing the MICR line, but any other identifier may be employed within the scope of the claimed invention. For each of the original checks  46 A,  46 B and the substitute checks  46 C,  46 D, the scanner  30 , at step  52 , generates a respective data set including a respective identifier, e.g., the information contained in the MICR line. At step  52 , the communications link  34  receives the data sets  46 E-I from one or more of the BOFDs  18 A- 18 C, and transmits the data sets  46 E-I to the processor  42 . The processor then extracts the data  48 E-I representing a MICR line from each of IRD data sets  46 E-I.  
         [0031]     If an identifier besides the MICR information is used, then optical character recognition or other suitable technologies may be employed to capture the identifier. Each identifier of items  46 A- 46 I should be unique. If the identifier of any of items  46 A- 46 I is identical to the identifier of another of items  46 A- 46 I, or any other check, substitute check, or electronic check image, then an erroneous replication of a check has occurred, which may result in the account of the payor of the original check being debited erroneously.  
         [0032]     The database  38  stores identifiers of items that have been processed by the clearing intermediary  22 , and, optionally, other clearing intermediaries. At step  56 , the processor  42  compares the identifier of one of the items  46 A- 46 I received to the stored identifiers in the database  38  and searches for a match. In other words, the processor  42  checks the contents of the database  38  to determine whether an item having the same identifier has already been processed. If the MICR information for a particular item  46 A-  461  is already in database  38  at step  56 , e.g., if the routing/transit number, account number, and check number of one of the items  46 A- 46 I are found in the database  38  at step  56 , then the item is a replication of an earlier processed item.  
         [0033]     Thus, for example, the system  28  captures the identifier, e.g., the routing/transit number, account number, and check number, from item  46 A at step  52  via scanner  30 , then compares the unique identifier  48 A of item  46 A to the contents of the database  38  at step  56 , which may include searching the database  38  for the unique identifier of item  46 A. At step  60 , the processor  42  inquires whether the unique identifier of item  46 A is in the database. If the unique identifier of item  46 A is in the database  38 , then the at least one processor  42  generates a notification signal  62  that is transmitted through the communications link  34  to notify the BOFD  18 A that transmitted the item  46 A, and the paying bank, i.e., one of  26 A-D, that corresponds to the routing/transit number of the item  46 A, at step  64 . The notification signal may also be sent to a correspondent bank or another clearing intermediary. Within the scope of the claimed invention, a notification signal is transmitted to an entity when the notification signal is transmitted to an agent of the entity.  
         [0034]     If the unique identifier of item  46 A is not in the database  38 , then the processor  42  adds the unique identifier of item  46 A to the database  38  at step  68 . The clearing intermediary  22  then transmits a check or substitute check for the item processed to the paying bank that corresponds to the routing/transit number of the item  46 A at step  70 .  
         [0035]     The processor  42  completes all of steps  56 ,  60 , and  64  or  68  for one of items  46 A-I before performing the steps for the others of items  46 A-I. In other words, the processor  42  completes steps  56 ,  60 , and  64  or  68  for only one item before performing steps  56 ,  60 , and  64  or  68  for another item. Accordingly, if a subsequently processed item has the same unique identifier as item  46 A, the unique identifier of item  46 A will be found in the database  38  during processing of the subsequent item at step  56 .  
         [0036]     For example, if item  46 C is an erroneous replication of original check  46 A, then items  46 A and  46 C will have identical identifiers. If item  46 C is processed after item  46 A, then the replication will be determined during processing of item  46 C at step  60 . Similarly, if item  461  is an erroneous replication of item  46 H, then they will have identical identifiers. If the processor  42  completes steps  56 ,  60 , and  68  for item  46 H before  46 I, then the identifier of item  46 H will be a stored identifier in the database  38  when the processor  42  performs steps  56  and  60  for item  46 I.  
         [0037]     Alternatively, and within the scope of the claimed invention, the database  38  may be maintained by a third party other than the clearing intermediary  22 . The clearing intermediary, or multiple clearing intermediaries, may transmit identifiers to the third party, which would then perform steps  56 ,  60 , and  68 , and notify the clearing intermediary  22  if the answer to the inquiry at step  60  is affirmative.  
         [0038]     Referring to  FIG. 4 , wherein like reference numbers refer to like components from  FIGS. 1-3 , a second check clearing scenario is schematically depicted. Checks are often sent to “lockboxes” for bill payments, etc. Lockbox service providers can be banks or third party providers. In a lockbox scenario, checks may never physically be deposited at a bank, but information accumulated in the processing of those items is transmitted to banks and the payees. Some lockbox providers may be considered a “third party intermediary” within the scope of the claimed invention. Items processed by a lockbox service provider may also enter the clearing system and be processed by any of a number of different intermediaries. In the scenario of  FIG. 4 , a lockbox provider  78  receives checks  74  from multiple payors as understood by those skilled in the art and transmits checks, check images (electronic images) or substitute checks to clearing intermediary  22 . The lockbox provider  78  transmits deposit data to Banks of First Deposit  18 A, 18 B. Steps  52 ,  56 ,  60 , and  64  or  68  may be advantageously performed by lockbox provider  78 . Similarly, the system  28  may be advantageously used by lockbox provider  78 .  
         [0039]     Referring to  FIG. 5 , wherein like reference numbers refer to like components from  FIGS. 1-4 , a third check clearing scenario is schematically depicted. Many banks do not have their own check operations, but have instead chosen to outsource their check operations to a third party processor  82 . More specifically, BOFDs  18 A,  18 B receive checks from payees  14 A- 141 . BOFDs  18 A,  18 B transmit the checks received from the payees to the third party processor  82 , which then sends checks, substitute checks, and/or electronic check images to the clearing intermediary  22 . The check outsourcing provider  82  transmits deposit data to the BOFDs  18 A,  18 B. This example demonstrates how an outsourcing provider, which processes items on behalf of multiple banks or other entities, may also be considered a clearing intermediary within the scope of the claimed invention and could advantageously employ system of  FIG. 2  and the method of  FIG. 3 . A clearing intermediary may also include an outsourcing provider for paying banks within the scope of the claimed invention.  
         [0040]     While the best modes for carrying out the invention have been described in detail, those familiar with the art to which this invention relates will recognize various alternative designs and embodiments for practicing the invention within the scope of the appended claims.