Smackdown Series: The Reversal Rumble with Host Joe Casali
Wrestling Payments Podcast: Season 3 - Episode 10
In this episode of Wrestling Payments, Joseph Casali launches a three-part "SmackDown Rules Violations in the Ring" series, examining ACH rule violations through wrestling metaphors. He analyzes two critical NACHA case studies that payment professionals should understand to avoid costly compliance mistakes.
The first case involves Glen Transportation's unauthorized $50,000 reversal attempt against KJN Storage, earning them a warning letter as a first-time offender. The second, more severe case examines a complex arrangement between Macklan Development, Workforce Assist, and Processing for You Inc., where improper payroll reversals led to a substantial $100,000 fine.
Joseph details how the third-party payment processor initiated unauthorized reversals when their customer failed to fund payroll credits, causing consumer accounts to be debited multiple times. This "nested third-party" arrangement lacked proper oversight and controls, resulting in widespread harm to employees, businesses, and financial institutions.
"Just like in wrestling, when you try to reverse the outcome after the match is over, you'll find yourself facing the regulatory referee," warns Casali. "In the NACHA ring, proper reversals require proper cause, not just a desire to take back what you've already given."
Download Episode Transcript
Host-at-a-Glance
💡 Name: Joseph Casali
💡 What they do: Executive Vice President of NEACH
💡 Company: NEACH & NEACH Payments Group (NPG)
💡 Where to find him: LinkedIn
Key Insights
Prevention Beats Correction in Payment Operations
The root of most improper reversals isn't misunderstanding rules—it's inadequate front-end controls. Rather than focusing on when reversals are permitted, payment professionals should strengthen transaction validation before payments enter the network. Organizations eliminate the scenarios that tempt improper reversals by implementing proper authorization checks, sufficient funding verification, and receiver confirmation processes up front.
Prevention not only avoids NACHA enforcement but creates more efficient operations overall. Smart payment managers know that building guardrails before transactions occur costs far less than attempting corrections after funds have moved.
Clear Accountability Is Essential in Third-Party Relationships
When payment services involve multiple providers, responsibility becomes dangerously diluted. The "nested third-party" arrangement in the payroll case demonstrates how quickly problems cascade when accountability chains break down. Financial institutions must establish explicit contractual requirements defining precisely who bears responsibility for compliance at each processing stage.
Regular audits, performance monitoring, and transparent communication channels between all parties are essential. The most successful payment operations leaders create relationship maps that establish clear lines of authority and ensure visibility across the entire transaction lifecycle.
Consumer Impact Elevates Regulatory Response
What regulators might treat as minor procedural issues in B2B contexts become major enforcement priorities when consumers feel the impact. Payment operations teams need separate, enhanced control frameworks for transactions touching consumer accounts. Payroll processing, direct debits, and other consumer activities demand heightened verification steps, stronger reconciliation processes, and faster exception handling.
The immediate financial hardship consumers experience from improper transactions—and the resulting reputational damage—justifies investing in these stronger safeguards. Smart operations leaders recognize this regulatory reality and allocate resources accordingly.
Good Faith Remediation Creates Regulatory Opportunities
NACHA's progressive enforcements offer a valuable opportunity for payment professionals who respond correctly to violations. Rather than hiding issues, organizations should develop incident response protocols that prioritize prompt identification, transparent disclosure, and comprehensive remediation.
This good-faith approach often transforms what could be penalties into opportunities for improving regulatory relationships and strengthening operational processes. The difference between a warning letter and a six-figure fine often comes down to how quickly and thoroughly an organization addresses the root causes of a violation and implements systems to prevent recurrence.
Episode Highlights
Understanding Improper Reversals [00:03:20]
The opening segment introduces the first case study involving Glen Transportation's attempt to reverse $50,000 in payments to KJN Storage without proper authorization. Joseph explains how this became a NACHA rules violation when Glen Transportation tried to use the ACH network as a dispute mechanism. The receiving bank challenged the reversal because it failed to meet any valid criteria for reversals under NACHA rules.
"Glen Transportation initiated an ACH credit entry to its trading partner, KJN storage, and the amount of $50,000. The following day, Glen Transportation sent an ACH debit entry in the amount of $50,000 to KJN storage in an attempt to reverse the credit entry."
Valid Reasons for ACH Reversals [00:05:45]
Joseph details the legitimate reasons for reversals in the ACH network, emphasizing that disputes between parties should be resolved outside the system. He explains that the bank, representing Glen Transportation, denied the violation by claiming the original credit was unintended, an argument NACHA rejected.
"The system of fines does not judge or resolve an underlying dispute between an originator and receiver, such as this case. The resolution of the dispute between an originator and receiver should happen off or out of the ACH network."
Tag Team Betrayal: Payroll Reversals Case Study [00:07:30]
This segment introduces the more serious second case involving unauthorized payroll reversals. Joseph explains how a third-party payment processor attempted to claw back funds already distributed to employees when their customer failed to fund the payroll, resulting in multiple debits to employee accounts.
"The first and primary rule, you cannot issue a reversal simply because the funds are unavailable to pay a payroll. That is not a reason for reversal. All the steps should have been taken prior to that file hitting the network."
Consequences of Severe ACH Violations [00:14:00]
The final segment covers the severe consequences faced by the financial institution in the payroll reversal case. Joseph explains how this violation was classified as a Class Two infraction with a substantial fine, detailing the extensive harm caused to consumers, businesses, and the ACH network's reputation.
"As a class two violation, the financial institution was subject to a fine between $0 and a hundred thousand dollars per month until the issue was resolved. A onetime fine of a hundred thousand dollars was imposed against Simon Bank, that is a serious fine."
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