Effective April 1, 2011, the Federal Reserve Banks are amending Operating Circular 2 (OC-2), Cash Services, and the Cash Services Manual of Procedures (the CSMOP). The CSMOP supplements OC-2 and defines operational procedures for FedCash Services. Financial institutions must refer to both OC-2 and the CSMOP for complete terms and procedures regarding Federal Reserve cash services.
The key changes to OC-2 will be contained in Appendix 1, which regards the Federal Reserve Banks’ custodial inventory program, as follows:
Section 1.13, Subcontractor; Assignment
- Language added to section 1.13 of Appendix 1 will affirm the existing requirement that if an institution that participates in the custodial inventory program subcontracts operation of their vault or operational responsibilities for the program to a third party, after obtaining consent of the Federal Reserve Banks, that institution represents and warrants that it has entered into an agreement with the third party requiring it to comply with all applicable provisions of Operating Circular 5, Electronic Access.
Section 5.2, Books, Records and Accounts
- The Federal Reserve Banks will reduce the record retention requirement for institutions that participate in the custodial inventory program and their subcontractors from seven years to three years from the date a record is created if no dispute relating to that record arises before its destruction.
The key changes the Reserve Banks are making to the CSMOP are as follows:
Section 4.0, Deposits of Cash
- Section 4.1 will specify that plastic bag material used for currency deposits must be a minimum 5-mil or of equivalent in strength and durability.
- Section 4.2 will specify that currency banding material must be between 1.00 to 1.57 inches wide, with an approximate weight of 100g/sqm, and made of paper (not synthetic materials).
- In section 4.2, the Reserve Banks will eliminate the requirement that your institution face all notes portrait side forward when preparing a deposit in denominations of $1 through $20. This change does not apply to deposits of $50 and $100 denominations.
- Also in section 4.2, the Reserve Banks will require that institutions arrange the straps within bundles of $1 through $20 denominations so that all of your bank stamps face in one direction. This change does not apply to deposits of $50 and $100 denominations. For $50 and $100 denominations, your bank stamp must be placed on the back of the band rather than the portrait side.
Section 6.0, Handling Differences in Currency and Coin
- Section 6.3 will set forth updated procedures for disputing a deposit adjustment. You will need to submit all disputes on adjustments to your deposits by filing the new Deposit Adjustment Dispute Form within five business days of the receipt of a difference notification. You will need to include with your Deposit Adjustment Dispute Form all necessary enclosures (including the Federal Reserve Banks’ difference advice with strap image) and an officer listed on your Official Authorization List will need to sign it. The Reserve Banks will not accept any Deposit Adjustment Dispute Form submitted by a third party.
- In section 6.1, the Reserve Banks will modify the procedures for filing a claim for differences found in currency and/or coin orders. You will need to submit all difference claims by filing a Difference Claim Request Form. The previous option of submitting difference claims on your institution’s letterhead will be eliminated. In addition, the requirement for you to perform dual control verification of currency orders received from the Federal Reserve Banks will be reinforced in this section.
Section 7.0, Transportation of Cash
- In section 7.1, you will be required to submit armored carriers providing transportation services to and from a Federal Reserve Bank’s dock by filing a FedCash Services Request Form. The previous option of submitting changes to armored carrier services on your institution’s letterhead will be eliminated.
Your continued use of Reserve Bank services on or after April 1, 2011, constitutes agreement to the new terms of OC-2 and the CSMOP. For this reason it is important that you review the changes to these documents and plan for any operational impact prior to April 1, 2011, to ensure your continued compliance.
See the link below to the Federal Reserve Bank services website for the official versions of the amended OC-2 and the amended CSMOP and for a full summary of the changes the Reserve Banks will make to each. To request a paper copy of any of these documents, contact your Customer Contact Center.
“FedCash” is a registered service mark of the Federal Reserve Banks. A complete list of marks owned by the Federal Reserve Banks is available at FRBservices.org.