Frequently Asked Questions about IAT
Question:
What type of due diligence is the Corporate Originator expected to do to determine if they need to originate IAT transactions?
Answer:
The determination of an appropriate type and degree of due diligence in properly identifying international payments is not defined by either NACHA or OFAC. OFAC mandates that a company properly identify and handle a payment involving the movement of funds internationally, and NACHA mandates the proper use of Standard Entry Class Code and application of the rules based on the nature of the funds transfer and the parties involved in the payment, however neither provides rules or specific guidance on how necessary information to comply with those standards is obtained. As a result, it is left to the parties bound to such standards to establish business practices that enable them to gather necessary information to comply with those standards.
Although the ODFI warrants proper formatting of transactions and compliance with relevant rules, the corporate Originator is also bound to comply with those rules through its contract with its ODFI. In most cases, the corporate Originator, rather than its ODFI, is in the better position to know the parties with which it does business, where those funds are destined, where its employees reside, etc. As a result, Originators should generally hold the responsibility for asking appropriate questions of their vendors and employees sufficient to determine whether those funds will remain domestic or whether the funds will move internationally.
The ODFI and its customer should work closely together to identify what level of risk each is willing to take on regarding their compliance with NACHA and OFAC requirements and what level of research is necessary to meet that risk tolerance for potential violations of these rules and regulations. These issues, and the specific responsibilities of each party, should be specifically defined within the ODFI-Originator contract.
NACHA has developed some sample language for communications between Originators and their employees and vendors, which can be found on NACHA’s IAT Resource Page (at www.nacha.org). This or similar language could be included within employee newsletters, on companies’ websites, and included with new-hire information. Similar notifications could be provided to current and potential new vendors. NACHA does not suggest that companies survey and receive responses from every employee or vendor. Rather, each company should determine whether they have transactions being sent out of the country, develop a specific company policy to determine how this should be addressed, and implement that policy. Whether the company identifies specific parties to contact or whether a general notice is provided to all, and the frequency with which such notice may be re-issued, will need to be determined by each company on an individual basis.
Question:
Are there any Transaction Codes that IAT should not be used for?
Answer:
IAT entries may be sent to demand, savings, general ledger, and loan accounts for live entries, pre-notes and returns. Zero dollar IAT entries may be sent to demand and savings accounts, but should not be sent to general ledger or loan accounts.
Question:
Should the content of the "Number of Addenda Records" field be changed for an IAT return or NOC?
Answer:
For IAT Returns and NOCs, the contents of the Number of Addenda Records field are copied from the original IAT entry and remain unchanged on the return or NOC. The ACH Operators do not edit that field on returns/NOCs to ensure that the number corresponds to the actual number of addenda records attached to the return or NOC. This is consistent with how CTX returns are processed today.
Question:
If there is a debit block service on an account and we receive an inbound IAT debit that is not in violation of an OFAC sanctions program, can we return the IAT debit?
Answer:
Yes, if the debit has been reviewed for OFAC compliance and is not in violation of an OFAC sanction, the debit can be returned. All IAT debits must be reviewed for OFAC compliance before they can be processed or returned because of a debit block service.
Question:
Is there any field in the IAT format to indicate if an entry is a consumer or business transaction?
Answer:
No, there is not an indicator for this. Most other countries do not differentiate between corporate and consumer transactions.
The use of one SEC code for all international payments requires participants to treat international payments to consumer and business accounts in the same manner. As a result, the longer timeframe associated with the return of unauthorized consumer transactions under the Rules is also applied to unauthorized entries to business accounts.
Specifically, the return of any unauthorized IAT entry would be required to be transmitted by the RDFI in such time and manner that the return entry would be made available to the ODFI no later than the opening of business on the banking day following the sixtieth calendar day following the settlement date of the original entry.
Question:
As an RDFI, what should we do if we receive an inbound IAT debit transaction that is a hit on the SDN list?
Answer:
For a transaction confirmed as an OFAC hit - contact OFAC directly. The Gateway Operator may have missed this transaction, cleared the transaction or the OFAC list may have been revised. OFAC will handle these situations on a case-by-case basis.
Question:
What specific language needs to be included in a financial institution's OFAC policy, as it relates to IAT?
Answer:
A financial institution should modify its existing OFAC compliance policy to include IAT transactions. NACHA has provided guidelines on what should be considered in demonstrating OFAC compliance in Supplement #1-2009, which updated the 2009 NACHA Operating Guidelines Section IV - Special Topics, OFAC Compliance, and in Chapter Two of the IAT Survival Guide. However, NACHA is not able to provide specific language on what should be included since this is a bank specific issue. Financial institutions should consult their legal and compliance departments for guidance in updating their OFAC policies to accomodate IAT entries.
Question:
We are an FI and we think we are ready for IAT, but who do we contact to set up testing?
Answer:
You should contact you ACH Operator to schedule testing.
Federal Reserve: http://www.frbservices.org/eventseducation/education/fedach_iat_resource_center.html
EPN OFAC Training/Information Contact: EPNIATtesting@epaynetwork.com or 800-875-2242
Question:
Can the RDFI rely on the ACH Operator to NOT send through an IAT from a sanctioned country or in violation of an OFAC sanction?
Answer:
No, the ACH Operators are not going to screen IAT transactions for OFAC compliance. It is the responsbility of the Gateway Operator and the RDFI to review IAT transactions for OFAC compliance.
Question:
Who adds the IAT addenda record for foreign correspondent bank information to the IAT transaction and what is the maximum number of optional addenda records?
Answer:
The Foreign Correspondent Addenda Record is added when the transaction reaches the U.S. Gateway Operator on inbound IAT transactions only. Who creates the addenda record would be a decision made by the Gateway Operator and their customer, but it would be added at that point in the process.
There is a maximum of 5 optional addenda records for the IAT that can include the IAT Addenda Record for Remittance Information (maximum of 2) and the IAT Addenda Record for Foreign Correspondent Bank Information. The Remittance Information addenda records take priority , so if there are 2 Remittance Information addenda records and more than 3 Foreign Correspondent Banks involved in the transaction the additional Foreign Correspondent Banks would be dropped. OFAC has been clear that the Remittance Information must be passed to the RDFI.
Question:
Does the IAT require any new statement language?
Answer:
- While the IAT does not require new statement language, the RDFI may need to pull information for the statement from a new location in the ACH entry. (For example the Company Name field in other SEC codes is in the Company/Batch Header Record. In the IAT, this information is in the Originator Name field in the Second Addenda Record.)
- If the Transaction Type Code field is populated with a secondary SEC code, the financial institution must check the Payment Related Information field in the Remittance Addenda Record for information related to the payment that must be provided to the consumer (Regulation E requirement). This information is not in the same location as a domestic e-check application such as BOC, POP, or ARC.
- For the corporate Receiver, any remittance information that is received in the Payment Related Information field of the Remittance Addenda must be provided to the Receiver within 2 business days, if it is requested.
Question:
As a corporate originator what type of due diligence do I need to do with my employees to determine if they are sending their funds out of the country and we should be coding their payroll as an IAT?
Answer:
A corporation should have procedures in place to notify employees about IAT and inquire if they are sending their paycheck out of the country. NACHA has created a sample document that you may find helpful. The sample document is available for employers/companies to use to notify their employees and vendors about IAT in order that the employee/vendor may inform the employer/company that IAT may be required for their payment. This document is posted on the IAT Resource page under the Corporate Tool Kit section.
Question:
Is NACHA going to revise the sample ODFI-Originator agreement to include IAT?
Answer:
No, the sample ODFI-Originator agreement found on page OG 17 of the NACHA Rules is provided for illustrative purposes only and has never been revised to include specific SEC codes or applications. The ODFIs and their customer should consult with their own counsel and rely on their own business judgment in determining to what, if any, extent they wish to utilize the form in the NACHA Rules book.
Question:
If my payroll needs to be sent as IAT, could my employees’ availability be affected?
Answer:
Yes, for two reasons; 1) unlike PPD, there is no requirement that IAT credit entries that are made available to an RDFI by its ACH Operator by 5:00 p.m. on the banking day prior to the Settlement Date be made available to the Receiver at the opening of business on the Settlement Date. Cleared IAT entries must be available no later than the Settlement Date of the entry, but funds are not required to be available at opening of business, and 2) if the IAT transaction were found to be suspect during the OFAC review, the transaction must be held until the issue is resolved and the item is cleared or identified as an actual OFAC violation.
Question:
For inbound IAT transactions, which FI is identified in the 4th addenda record?
Answer:
As defined in the Rules, for an Inbound IAT entry, the Originating DFI Identification Field within the Fourth Addenda Record must contain the National Clearing System Number of the foreign Originating DFI. It would follow that all other information in this addenda record should also relate to the foreign Originating DFI. Information about the U.S. ODFI/Gateway Operator is located in field 16 of the IAT Company/Batch Header record.