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International ACH Transactions IAT

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OFAC has recommended that RDFIs (these are not NACHA requirements) ... ( This field is optional under NACHA Operating Rules, but its use is strongly encouraged. ... – PowerPoint PPT presentation

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Title: International ACH Transactions IAT


1
International ACH Transactions(IAT)
2
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.

3
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.

4
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

5
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

6
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.)

7
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

8
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.

9
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

10
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!

11
Where to Get More Information
  • www.nacha.org/IAT_Industry_Information
  • www.ustreas.gov.offices.enforcement/ofac/
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