NACHA Voting Membership Approves International ACH Transactions Ballot
NACHA has announced that its voting membership has approved "an amendment to the NACHA Operating Rules that will require all international payments made via the ACH Network to be identified as International ACH Transactions using a new Standard Entry Class (SEC) Code--IAT. The new Rule will also require that IAT payments include specific data elements defined by the Bank Secrecy Act's (BSA) "Travel Rule (i)." The implementation date of the rule amendment is March 20, 2009."
"The new Rule is an act of industry self-regulation that will assist the federal government in achieving its public policy goals," explains Priscilla Holland, Senior Director of Network Development at NACHA. "It will also enable financial institutions to easily identify all international payments flowing through the ACH Network and all parties involved in the transactions, making it easier to comply with U.S. law."
Currently, there are international ACH payments that Receiving Depository Financial Institutions (RDFIs) cannot identify. Many payments initiated internationally enter the U.S. ACH Network through correspondent banking relationships. Consequently, a number of international payments are formatted as domestic transactions, making it difficult for Depository Financial Institutions (DFIs) to identify these transactions for purposes of complying with U.S. law.
The new Rule will identify 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 international transactions, will be sent as IATs.
The identification of these payments as international transactions and the inclusion of the "Travel Rule" information (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) will make it easier for RDFIs to comply with OFAC-sanctioned guidance.
"Financial institutions have a responsibility to help safeguard the U.S. financial system from abuses involving international payments," says Holland.
While financial institutions can rely on each other for compliance to U.S. law in the domestic payment environment, DFIs cannot rely on international counterparts to comply with OFAC-sanctioned examination procedures, included in the Federal Financial Institutions Examination Council's (FFIEC) Bank Secrecy Act/Anti-Money Laundering Examination Manual.
Implementation of the new SEC code provides additional benefits. The majority of ACH systems around the world do not distinguish between payments transmitted to consumer and business accounts. The IAT Standard Entry Class (SEC) Code will enhance Network processing efficiencies and enable accurate mapping of data between domestic and international payment systems.
The amendment will also make the U.S. ACH Network formats more consistent with other network formats. For example, wire transfer formats currently carry the "Travel Rule" information to comply with BSA. The change is also consistent with the field lengths in SWIFT formats to ensure efficient mapping of data.
NACHA will develop and release educational materials for ACH Network participants prior to implementation.
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