IAT Rule Change
NACHA rule change for ACH payments, Effective September 18, 2009
Impact on Businesses
On September 18, 2009, an amendment to the National Automated Clearinghouse Association (NACHA) Operating Rules takes effect and has the potential to impact U.S. businesses that send or receive ACH payments. This amendment will require all payments funded internationally to be identified as International ACH Transactions using a new Standard Entry Class (SEC) Code "IAT." The new rule will also require that IAT payments include specific data elements defined by the Bank Secrecy Act's (BSA) Travel Rule.
What is an IAT?
IAT stands for International ACH Transaction, and is a new Standard Entry Class code to identify international ACH payments. An IAT is an ACH debit or credit entry that is part of a payment originating from or transmitted to an office of a financial agency (ie. bank) located outside the territorial jurisdiction of the United States.
The new IAT rule will identify International ACH Transactions by focusing on where the financial agency that handles the payment is located. Specifically, when any ACH entry is part of a payment that involves a financial agency office that is not located within the territorial jurisdiction of the United States, the ACH entry must be identified using the new IAT SEC Code. Thus, certain payments currently formatted as domestic payments, but which are funded internationally, will need to be sent as IATs.
Why was this new rule developed?
The IAT was developed in response to a request from the Office of Foreign Asset Control (OFAC). OFAC understands that there are currently transactions flowing through the ACH Network that are funded by international sources. These transactions cannot currently be identified within the Network, and are formatted as domestic transactions. OFAC has requested that NACHA modify the NACHA Operating Rules to adequately identify international transactions, and have the banks review the international transactions for OFAC compliance.
How do I know if the IAT applies to my ACH payments?
If you can answer yes to any of the following questions this may be a clue that the new IAT rule change will affect you.
- Is your company a subsidiary of a multi-national company?
- Does your company have foreign subsidiaries?
- Does your company buy or sell to organizations or individuals outside the territorial jurisdiction of the United States?
- Does your company send payroll, pension or benefit payments via the ACH Network to individuals that have permanent resident addresses outside the territorial jurisdiction of the United States?
Where can I learn more about the IAT impact on ACH payments?
Please reference the following documentation from NACHA's Web site that provides more detail on the IAT rule change and will help you determine if your company will be affected:
- IAT for Corporate Practitioners
- IAT FAQ's
- IAT Payment Scenarios Simplified
- IAT Specific Data Elements
Visit NACHA online to read more about the rule change.
Future Rabobank services:
Currently Rabobank does not offer IAT Origination. If you have questions or to determine if your company should be originating IAT Transactions please contact your Treasury Manager, call (800) 959-2399, or e-mail us. You will be provided with alternative payment options.
Impact on Consumers
A new Automated Clearing House (ACH) transaction code takes effect September 18, 2009. The new IAT code stands for International Automated Clearing House Transaction. These transactions are defined as any credit or debit entry that is part of a payment transaction involving a financial office that is not located in the territorial jurisdiction of the United States. You may be receiving an ACH Transaction that will qualify as an IAT and not know it.
This new rule applies to all ACH participants and will simplify the process of identifying international transactions by requiring that IAT entries include specific data elements defined by Bank Secrecy Act's (BSA) "Travel Rule." This will make it easier for depository financial institutions to comply with U.S. laws, such as requirements by the Office of Foreign Asset Control (OFAC).
Customers who may experience IAT's include but are not limited to
- Customers with addresses outside the United States
- Customers using PayPal of other ACH Methods to complete transactions
- Customers whose payroll or pensions direct deposit funding originates from a parent company in another country.
What does this mean to you?
If you are currently receiving an ACH transaction to your account or plan to in the future, the following will apply to your transaction(s).
The Bank must review every IAT transaction for OFAC compliance prior to processing the transaction. Transactions that are identified as suspect must be investigated which may cause delays in the posting of those items. We will make every effort possible to keep those delays as short as possible.
Please contact Rabobank's Customer Care Department at (800) 942-6222 for further assistance.