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September 18, 2009 NACHA Rule Change International ACH Transactions (IAT) Transactions Involving a Foreign Financial Institution or Foreign Agency. IAT Agenda. IAT Definition and Payment Transaction Guidance Why NACHA is Implementing IAT? OFAC – Their Involvement and Needs
NACHA Rule Change
International ACH Transactions
Transactions Involving a Foreign Financial Institution
or Foreign Agency
An office of a financial agency is involved if one or more applies.
The financial agency / financial institution:
(Location of the beneficiary and originator is not considered in the identification of IAT transactions).
Financial institutions currently have the obligation to screen wire transfers against the list of names maintained by OFAC, in accordance with the Travel Rule of the Bank Secrecy Act
Similarly, financial institutions will need to screen ACH IAT entries in accordance with OFAC regulations and NACHA Operating Rules
Background on OFAC:
OFAC is the Office of Foreign Assets Control, an office of the Department of the Treasury that administers and enforces economic and trade sanctions in support of U.S. foreign policy and national security goals. The sanctions programs are used by the U.S. government to prevent targeted countries, entities, and individuals from, among other things, accessing our financial system for purposes that are contrary to U.S. foreign policy and national security.
No U.S. person or company can engage in trade or financial transactions with individuals, companies, or government institutions designated under OFAC sanctions programs, or with persons or entities acting for or on behalf of these countries, entities, or individuals.
Names of individuals, banks, companies, and other entities designated by OFAC as threats to the U.S. economy, foreign policy, or national security are placed on the Specially Designated Nationals and Blocked Persons List (SDN list), which can be found on OFAC’s website: www.treas.gov/ofac or www.treas.gov/offices/enforcement/ofac/
SDN List will be used by financial institutions to screen against the content of the ACH IAT entries
Financial Institutions will be required to OFAC screen both inbound and outbound ACH IAT entries so there may be delays in posting if an IAT entry needs to be researched further
All companies are subject to U.S. law, including OFAC sanctions
Originator is required to warrant that they will comply with the NACHA Rules and will not initiate ACH entries that violate the laws of the United States
In addition, ACH Originating Financial Institutions will obligate an Originating Company or Third Party Sender through the warranties in their ACH origination agreement or Terms & Conditions.
Foreign financial institution funding of Payroll, Pension or Vendor Payments
A U.S domiciled company which is a subsidiary of an offshore multinational is
originating ACH credits into the ACH network. They could be payroll, pension, or
ACH entries should be coded as IAT entries when the non-U.S. financial institution is
involved in the explicit funding the of the ACH settlement amount needed to execute the
ACH credits payments to Foreign Receiver(s)
ACH credits originated by the U.S. originating companies should be IAT entries.
This has been the most controversial scenario as it is not always possible for the Originator to know whether funds have been forwarded. Receiver’s address may not be the best indicator but may be indicative of the need to request more information.
A U.S.-domiciled money transmitter receives a payment order from a foreign
customer at one of its foreign branch offices to send funds to a Receiver in
ACH credit to the Receiver the U.S. should be coded as an IAT credit
NACHA-published IAT Scenarios are not all encompassing.
If originating IAT entries, then allow enough time for IAT format preparation.