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New, Time-Sensitive Requirements for ACH Originations

Because the format of an IAT batch is dramatically different from other NACHA transactions, First Tennessee requests all clients that wish to originate International ACH Transactions to provide a sample NACHA file a minimum of two weeks prior to the first production file. This precaution is to verify that transactions are processed properly.

On September 18, 2009, the National Automated Clearing House Association (NACHA) implemented an amendment to the NACHA Operating Rules that has the potential to impact many U.S. businesses that send or receive electronic payments through the Automated Clearing House (ACH) Network. All participants in the ACH Network are bound by contract to comply with the NACHA Operating Rules.

What's in the amendment?

This amendment requires all payments funded internationally or sent to another country via the ACH Network to:

  1. Be identified as International ACH Transactions (IAT) using a new Standard Entry Class (SEC) Code–IAT
  2. Include specific data elements defined by the Bank Secrecy Act's (BSA) "Travel Rule" (i.e., Originator name, address, account number; Originator's depository institution name and payment amount; Receiver name, address, account number; and the Receiver's financial institution)

The new amendment identifies International ACH Transactions by focusing on where the financial agency that handles the payment transaction is located. Thus, certain transactions currently formatted as domestic transactions, but are funded internationally, should be sent as IATs.

Why the change?

The change enables corporations, financial institutions and regulators to easily identify all international payments flowing through the ACH Network and all parties involved in the transactions, making it easier for everyone to comply with U.S. law. It enables ACH transactions to receive the same level of screening as International Wire Transactions.

How do you determine if the IAT applies to your company?

The following provides some general guidance on how to identify potential IAT scenarios.

  • If your company sends payroll, pension or benefit payments via the ACH Network to individuals that have permanent resident addresses outside the territorial jurisdiction of the United States you may be required to use the IAT to send these payments.
  • If your company is a subsidiary of a multi-national company or has foreign subsidiaries there is a strong possibility that the implementation of the IAT impacts your ACH processing.
  • If your company buys or sells to organizations or individuals outside the territorial jurisdiction of the United States you should talk to your financial institution about the impact of the IAT to your company.

If any of these situations apply to your business or you have questions about the change to NACHA rules, please contact your Relationship Manager.

 

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