FedACH^® Services

New tools call out international ACH items

In the January 2009 FedFocus article, “Eight months and counting to the IAT transition,” we recapped upcoming changes to the cross-border automated clearing house (ACH) payments market resulting from NACHA’s new International ACH Transaction (IAT) Standard Entry Class (SEC) code.

The new rule takes effect September 18, 2009, and is expected to revolutionize international ACH by bringing new opportunities for financial institutions and their customers. The IAT SEC code and format requirements will help financial institutions more easily identify all parties to an international payment and redefine roles and obligations of a gateway operator — a party that acts as the entry point to or exit point from the United States.

Every U.S. financial institution — even those that do not currently send or receive international ACH transactions — has the potential to receive an IAT entry after the rule is implemented. For this reason, every U.S. financial institution needs to understand the impact the new rule may have on its operations in addition to ensuring that all aspects of IAT transactions are in compliance with Office of Foreign Assets Control (Off-site Link) (OFAC) regulations. As part of this obligation, receiving depository financial institutions (RDFIs) will need to investigate each suspect inbound IAT transaction.

Two new FedACH tools help identify IAT activity

To help RDFIs differentiate IAT items from domestic items, the Federal Reserve Banks will make the following tools available once the IAT rule takes effect in September:

• With the IAT Output File Sort, RDFIs can elect to receive their forward IAT items (not IAT returns) in a separate file that does not include domestic items. These separate files will be available during each FedACH Services distribution window and will follow the same standard processing as domestic files. The IAT Output File Sort will help RDFIs to easily identify IAT items and to perform the necessary due diligence (i.e. OFAC screening). This tool will result in greater processing efficiencies for RDFIs by eliminating the need to examine the entire output file for IAT items. RDFIs will be able to sign up for the service by making changes to their FedACH Participation Agreement. More details about service features and pricing will be shared as the implementation date nears.
• The IAT Report, available via FedEDI^® Plus, will display all IAT items for a given business day at both the RDFI and corporate customer level, enabling RDFIs to better respond to IAT-related customer inquiries (see screen shot of sample report below). RDFIs can schedule daily automatic report delivery or manually request reports for select dates. Reports will be available in various user-selected formats (PDF, TXT, HTML), sorted by settlement date, and will include OFAC screening results at the top to help identify suspect IAT transactions.

For the latest news and updates, visit our IAT Resource Center. If you need more detailed information, please contact your FedACH sales specialist.

Sample IAT Report:

Top of Page