NACHA IAT Rules
PREPARING FOR SEPTEMBER 18, 2009
ATTUS is here to help you understand and navigate through NACHA’s upcoming rules change for international ACH transactions (IATs). Equip your institution with the following facts so that on September 18, 2009, your international ACH transactions continue to run smoothly and your institution is compliant with NACHA’s new IAT rules.
1. What are the new rules?
On September 18, 2009, NACHA’s new rules regarding international ACH transactions (IATs) go into effect. According to the rules, all ACH payments entering or exiting the United States must be uniquely identified and formatted as an IAT.
2. Who is instituting this change?
The National Automated Clearing House Association (NACHA) developed and approved the rules.
3. Why was there a need to create rules specific to IATs?
Globalization has increased the amount of money that flows back and forth between countries, including ACH transactions. NACHA’s current ACH formatting doesn’t ensure that all international ACH transactions are properly identified as such. This gap means that the appropriate due diligence required to ensure that U.S. laws are not violated may not be fulfilled. For example, an international ACH transaction not properly identified might not be screened against the U.S. Department of the Treasury’s OFAC SDN list to be sure that any involved parties are not targeted foreign countries, terrorists, international narcotics traffickers or involved in the proliferation of weapons of mass destruction.
4. Who do these rules apply to?
The rules apply to all financial agencies including financial institutions, money transmitting businesses and any other ACH network participants.
5. What is NACHA’s definition of an IAT?
NACHA defines an IAT as “a credit or debit entry that is part of a payment transaction involving a financial agency’s office that is not located in the territorial jurisdiction of the United States.” The most important thing for financial agencies to understand is that the deciding factor in whether or not a transaction is considered an IAT is the “location of the financial agencies involved in the processing and settlement of the transaction.” NACHA has created sample ACH scenarios to help financial agencies understand when and why a transaction is considered a domestic ACH or an international ACH transaction.
6. What determines whether an organization is involved in IATs?
According to NACHA, a financial agency is responsible for following the new IAT rules if they are involved in a payment transaction in any of the following ways:
hold an account that is credited or debited as part of the payment transaction
receive payment directly from a person or makes payment directly to a person as part of a payment transaction
serve as an intermediary in the settlement of any part of the payment transactions.
7. What if our financial institution does not currently initiate IATs?
Financial institutions should still prepare and implement an appropriate process for dealing with IATs because there is always the possibility that they will be on the receiving end of an IAT which would be subject to the rules.
8. How does this impact our business operations?
The rules create a new format which identifies international ACH transactions by the SEC code “IAT,” which applies to both consumer and business accounts. Financial agencies must incorporate this new format into their ACH process so that all IATs are identified as such and then screened for unlawful entries. Their process must ensure that the following information is captured for all IATs:
Name and physical address of the originator
Name and physical address of the receiver (beneficiary)
Account number of the receiver
Identity of the receiver’s bank
Correspondent bank’s name, Bank ID number and Bank Branch Country Code
Reason for the payment
9. How should our organization prepare for the new rules?
NACHA has developed several checklists to help financial agencies prepare for the new rules. In brief, financial institutions should take the following steps to be compliant by September 18, 2009.
Educate themselves on the new rules
Consider the rules’ potential impact on its related business units, such as operations, compliance, audit, customer service and corporate training
Each unit should prepare, test and implement the proper procedures for their involvement with IATs
All appropriate staff should be trained on the rules and the institution’s process for handling the rules
Determine if its outside vendors are prepared, including your compliance software providers
10. Does ATTUS have a product that incorporates the new IAT format?
Yes, WatchDOG® Pro, our web-based compliance solution, is fully equipped to scan the new IAT format for OFAC compliance, including the mandatory addenda records. With WatchDOG® Pro, financial agencies can integrate the new rules into their ACH process with little to no impact. Its advanced processing functionality streamlines the entire process to minimize the need for manual intervention, saving time and money. For example, you can upload your ACH files for WatchDOG® Pro to scan (domestic and/or IAT combined) against the OFAC list and then Pro automatically separates the source file into rebalanced clean and suspect files and generates a notice that is sent to your compliance department with possible matches and the capability to clear any false positives.
For More Information:
NACHA has developed an extensive library of information about the new IAT rules on its website, http://www.nacha.org/IAT_Industry_Information, including a “Readiness Checklist” and “Questions to Ask your Vendors about IAT Readiness.”
Contact us today to learn how ATTUS WatchDOG® Pro and IAT Module can simplify your preparations for September 18, 2009.
|