I am a Financial Institution That is Currently or Considering Originating and Receiving International Items (ODFI and RDFI)

How Does IAT Work for Inbound Payments?

  1. An originator initiates an international credit or debit with his or her Originating Depository Financial Institution (ODFI) abroad.
  2. The ODFI collects all required information to process international transactions and sends them to the U.S. gateway operator via its foreign gateway operator.
  3. The U.S. gateway operator receives and formats the transactions to comply with IAT requirements, performs an OFAC screen, and passes the IAT entries to the RDFI(s). Settlement will occur between the U.S. gateway operator and the foreign gateway operator, and separately between the U.S. gateway operator and the RDFI(s) in the U.S.
  4. The RDFI will credit or debit the receiver’s account. The transaction is then listed on the receiver’s account statement and may include the date of payment, name of the company paid and amount of payment.

International ACH Transactions RDFI (IAT) Flow Chart

How Does IAT Work for Outbound Payments?

  1. An originator initiates an IAT credit or debit with his or her ODFI in the U.S.
  2. The ODFI collects all international ACH transactions throughout the day, performs the necessary OFAC screening requirements to comply with U.S. law, and creates an ACH file for transmission to its U.S. gateway operator.
  3. The ODFI transmits the ACH file to its U.S. gateway operator for processing.
  4. The U.S. gateway operator processes the file and passes the IAT items to the RDFI(s) abroad via a foreign gateway operator. Settlement will occur between the ODFI and the U.S. gateway operator and between the U.S. gateway operator and the foreign gateway operator.
  5. The corresponding RDFI receives the transaction and posts it to the receiver’s account. The payment is listed on the receiver’s account statement and may include the date of payment, name of the company paid, and amount of payment.

International ACH Transactions ODFI (IAT) Flow Chart

OFAC Compliance Implications

Every depository financial institution (DFI) needs to understand the impact of the new rule on its ACH operations regarding OFAC compliance.  DFIs can contract with other parties for ACH processing services but cannot contract away their liabilities and obligations (Off-site Link) related to OFAC compliance.

U.S. ODFIs and their originators will continue to be responsible for ensuring that all parties to the transactions, as well as the underlying purpose of the transactions, are not in violation of OFAC regulations. They will also need to take appropriate steps to investigate, suspend, reject, block, and report on transactions. Refer to the new OFAC Screening Indicator fields [Entry Detail Record, Field 10 and 11] as a tool to aid in managing these compliance obligations.

Step by Step Preparation

The steps below outline the activities necessary to prepare for the implementation of IAT on September 18, 2009. Please print the IAT Readiness Checklist for ODFIs (PDF) that includes the following steps to help you in managing the completion of each item.

Step 1 – Familiarize Yourself with Available Resources

  • Review NACHA Operating Rules on IAT, which is included in the 2009 Rules Changes section of the 2008 publication
  • Take advantage of resources
  • Contact your Regional Payment Association (Off-site Link)

Step 2 – Ensure Internal Readiness

  • Select an Originating Gateway Operator that will process your outbound IAT entries. Refer to FedACH International Services and your FedACH Sales Specialist for more information on how to begin the enrollment process.
  • Verify that your software supplier or processor will be able to accommodate the IAT Standard Entry Class (SEC) code
  • Review current commercial/ corporate ACH origination products, including PC-based and Web-based applications, to determine how to integrate the IAT SEC code into your payment processing systems
  • Review field requirements and responses required for populating IAT SEC code
  • Verify completion of testing with all necessary parties. Examples are listed below:
    • Vendors
    • ACH Operators
    • Correspondent Banks
    • Customers
  • Verify that your compliance policyGuidelines developed to ensure the observance and conformity to regulations, rules and laws applicable to ACH payment processing. covers origination and receipt of ACH payments, including OFAC compliance
  • Ensure that all appropriate departments have completed training. Examples are listed below:
    • ACH operators
    • Treasury Management and payment service/sales
    • Compliance
    • Branch Operations
    • Customer Service
    • Vendor Management

Sign up now to take advantage of a number of IAT Webinars hosted by the Federal Reserve Banks that will provide valuable information and quarterly updates on the implementation of the new SEC code. These seminars offered at no cost and are available to anyone at your institution.

Step 3 – Identify Customer Impact and Readiness

  • Review existing ACH agreements
  • Determine which customers will be originating and receiving IAT payments and how to collect and deliver additional data carried in the ACH records
  • Provide education and training
  • Evaluate potential for attracting new customers interested in international payment services

Congratulations — you are ready to begin receiving IAT entries.

Training Resources

To learn more, listen below to a three part presentation on "Understanding New Requirements in the ACH Network: International ACH Transaction IAT," presented by Elena Whisler and John Morris from the Retail Payments Office at the Federal Reserve Bank of Atlanta. The information is provided in an audio format with corresponding slides for each section. To help you follow along, we recommend you first open the presentation slides prior to clicking on the corresponding audio:

Additional Resources

Do you still have questions? Please review the Frequently Asked Questions document for commonly asked questions about IAT. You may also contact us to submit a question not found on the FAQs and will receive an email response regarding your inquiry.

To receive the latest news about FedACH Services and the IAT Resource Center sign up for Email Alert Notification and make sure to select FedACH Services.

For more information about FedACH International Services or IAT, visit the service offerings pages , contact your FedACH Sales Specialist or contact us now and receive an email response to your immediate questions.

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