Phone: (800) 888-1498

International ACH Transactions (IAT)

Introduction

Effective September 18, 2009, the National Automated Clearing House Association (NACHA) is implementing a change to the rules governing the Automated Clearing House (ACH) Network as they relate to International ACH Transactions (IAT). As of that date, all international payments will be required to be identified with a new Standard Entry Class (SEC) Code in response to a request from the U.S. Department of Treasury's Office of Foreign Assets Control (OFAC).

The following list of items will help you determine how your company will be affected by the IAT ACH rule change.

What is IAT?

NACHA is implementing the new IAT SEC code for ACH payments to identify international transactions. International transactions are those payments that have been funded internationally or are being sent to another country with part of the transactions being processed via the ACH Network.

When will the new IAT SEC code become effective?

The new IAT code will become effective September 18, 2009. This means that all international ACH items intended to process on that day must use the IAT code and contain all the new field requirements.

Why is NACHA creating IAT?

IAT was developed in response to a request from the Office of Foreign Asset Control (OFAC). In its letters to NACHA, OFAC stated that it believes the ACH Network is vulnerable to abuse due to the speed and efficiency of the network. OFAC understands that there are transactions currently flowing through the network that are funded by international sources. These transactions cannot be identified currently within the network and are formatted as domestic transactions. OFAC has requested that NACHA modify the NACHA Operating Rules to adequately identify international transactions. In addition, banks should review the international transactions for OFAC compliance.

How do I know if IAT applies to my ACH payments?

If you answer yes to any of the following questions, please read the rest of the information contained in this packet and then call F&M Bank's Customer Service Center at (800) 888-1498 and ask to speak to the Electronic Banking Department about the impact of IAT to your company.

What major changes are expected with the new IAT SEC code?

The IAT SEC code will be used for both consumer and corporate international ACH credits and debits. In addition to requiring data elements defined by the Bank Secrecy Act's (BSA) "Travel Rule," OFAC screening indicators will be included with each payment to help RDFIs identify suspicious payments. Furthermore, all international inbound transactions will allow the use of a secondary SEC code to further identify the file type for all WEB, TEL, ARC, POP, BOC, and RCK transactions where applicable.

Who will the IAT SEC code impact?

The introduction of the IAT code will impact all U.S. financial institutions, including those that do not currently send or receive international payments as any financial institution is a potential receiver of an IAT transaction.

When should the IAT SEC code be used?

It may be unclear as to when to use and not to use the IAT code. Below are several helpful scenarios to assist in determining when to use the IAT code.

Scenario A - U.S. Domiciled Company/Standard Direct Deposit

Result: Non-IAT transactions, format as PPD transactions (domestic transactions)

Scenario B - U.S. Subsidiary of an Offshore Multinational Corporation

Result: Non-IAT transactions, format as PPD transactions (domestic transactions)

Scenario C - U.S. Subsidiary of an Offshore Multinational Corporation

Result: Non-IAT transactions, format as PPD transactions even though the ACH payment instructions were sent via SWIFT message through a foreign financial agency, there were no funds sent into the country

Scenario D - U.S. Subsidiary of an Offshore Multinational Corporation

Result: International transactions, format as IAT transactions

Scenario E - Vendor Payments

Scenario F - ACH Debits for Payments to Foreign Receivers

Result: The debit to the Originator's account in the U.S. would be an IAT transaction because the funds are moving out of the U.S. to a foreign financial agency

Scenario G - Pension Payments Scenario H - ACH Credit Payments (with Remittance Data) to Foreign Receivers

Result: The credit transactions going to the U.S. correspondent bank would be IAT transactions. The U.S. correspondent bank should instruct its correspondent to ensure that the transactions are formatted using the IAT SEC code

Where can I find more information regarding the IAT SEC code?

There are several Web sites you can visit for information regarding the IAT code.

Farmers & Merchants Bank of Central California (F&M Bank) will only allow domestic ACH transactions. The origination of IAT transactions will not be supported.
Please contact us at (800) 888-1498 and ask to speak to our Electronic Banking Department to discuss alternate international payment methods if required.