International ACH Transactions IAT

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International ACH Transactions(IAT)
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Scope of the new IAT issue

• Beginning September 18, 2009, any financial
  institution that participates in the ACH network
  has the potential to receive an IAT and must
  process it in accordance with OFAC policies.
• All international ACH transactions must be
  identified so that they can be screened for
  unlawful entries by certain parties considered to
  be engaged in terrorism or criminal activity.

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What is an IAT?

• An IAT is an ACH debit or credit entry that is
  part of a payment transaction originating from or
  transmitted to an office of a financial
  institution located outside the territorial
  jurisdiction of the United States.
• The distinguishing feature of an IAT is the
  geographical location of the financial
  institution involved in the payment transaction.
  It does not depend on the location of the
  originator or receiver of the transaction.

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The NACHA Rule for IAT

• Creates a new type of cross-border code
  transaction identified by the Standard Entry
  Class (SEC) code IAT
• IAT will replace PBR and CBR codes for
  international payments

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RDFI Responsibilities

• RDFIs must have a documented OFAC compliance
  policy for
• Handling IAT transactions
• Meeting OFAC compliance obligations
• OFAC has recommended that RDFIs (these are not
  NACHA requirements)
• Review all incoming IAT debits
• Post any clean transactions
• Investigate any suspects
• Post cleared transactions
• Report suspects confirmed as an OFAC hit to OFAC

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ODFI Responsibilities

• ODFIs must have a documented OFAC compliance
  policy that includes
• Determining if it has Originators that are
  currently originating ACH transaction that meet
  the definition of the IAT,
• Educating its staff on the implications of the
  IAT changes, and
• Educating its Originators on the obligations with
  the IAT rule changes.
• OFAC has recommended that ODFIs (these are not
  NACHA requirements)
• Review all inbound IAT debits, including parties
  to the transaction and all remittance data
• Segregate any suspect transaction into an OFAC
  review queue
• Populate the Gateway Operator OFAC Screening
  Indicator for clean transactions with 0. (This
  field is optional under NACHA Operating Rules,
  but its use is strongly encouraged.)

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ODFI Responsibilities, cont.

• Rebalance original batch and file, if necessary,
  and send to ACH Operator
• Investigate any suspects
• Post cleared transactions
• Populate the Gateway Operator OFAC Screening
  Indicator with 0.
• Batch cleared transactions and send to ACH
  Operator
• Suspects confirmed as an OFAC hit
• Cease processing of the entry
• Notify the Foreign Gateway Operator
• Notify OFAC within 10 business days
• Notify the RDFI that transaction for one of its
  customers has been rejected and provide a copy of
  the transaction

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Why the additional scrutiny?

• Treasury believes that cross-border ACH
  transactions currently do not contain sufficient
  mandatory field information to permit an adequate
  degree of scrutiny of transactions for OFAC
  compliance.

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IAT Transaction Requirements

• The information that must be included in an IAT
  is the same as the information in an
  international wire transfer.
• Name and physical address of the originator
• Name and physical address of the receiver
  (beneficiary)
• Account number of the receiver
• Identity of the receivers bank
• Correspondent banks name, Bank ID number and
  Bank Branch Country Code
• Reason for the payment

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Summary

• Beginning September 18, 2009, non-compliant
  entries will be rejected (returns or NOCs for
  those entries will be supported until March 19,
  2010).
• Given the potential for non-payment and/or
  sanctions, it is incumbent upon financial
  institutions to
• Understand the definition of an IAT and the
  impact to your organization,
• Develop an OFAC compliance policy incorporating
  the IAT rules, and
• Know Your Customer!

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Where to Get More Information

• www.nacha.org/IAT_Industry_Information
• www.ustreas.gov.offices.enforcement/ofac/