FedACH^® Services

Are you IAT-ready … or not?

June 2009

On September 18, 2009, NACHA’s new International ACH Transaction (IAT) rule (Off-site Link) takes effect, allowing institutions to better identify international automated clearing house (ACH) transactions and comply with Office of Foreign Assets Control (OFAC) (Off-site Link) requirements.

In an effort to help measure industry-wide awareness of the IAT standard entry class (SEC) code and readiness for implementation, the Federal Reserve Banks conducted a survey in March 2009 as a follow-up to a similar mid-2008 survey. One major change regarding IAT has taken place since the initial effort: the 2008 survey was conducted prior to NACHA’s extension of the IAT effective date (PDF), from March 20 to September 18, 2009.

And the survey says …

Approximately 300 individuals participated in the survey. Most respondents were from U.S.-based financial institutions, with over half representing community banks.

Overall, most survey respondents (93 percent) indicated that they would be ready to process IAT payments by the September 18 deadline or sooner. Only 7 percent expressed concern about being ready by the deadline. This expected readiness level represents an increase over results from the 2008 survey, in which 84 percent of respondents expected to be ready for implementation and 17 percent expressed concerns about their institution’s readiness.

Knowledge about the responsibilities of financial institutions, such as OFAC compliance, also increased from 2008. More of those surveyed this year (28 percent in 2009, versus 18 percent in 2008) consider themselves knowledgeable about their organization’s roles and responsibilities associated with sending and receiving IAT items. Respondents from commercial banks (60 percent) consider themselves the most knowledgeable, compared to 21 percent at credit unions and 19 percent at community banks.

Education lessened readiness concern

Survey respondents have also taken steps to educate and prepare themselves for implementation. Nearly two-thirds (64 percent) of those surveyed have read the new NACHA rules, attended an educational or training session, been in contact with their ACH software vendor about the new code or begun discussions with their compliance officer about receiving IAT items. A smaller portion of survey respondents (35 percent) said they have contacted their regional payments association (RPA) (Off-site Link) for assistance. These results also represent an improvement over results from the 2008 survey, in which more than three-fourths of respondents sought more information on IAT.

A topic for additional focus emerged in the area of customer education by financial institutions. Most (73 percent) of those financial institutions surveyed have not yet contacted customers about readiness to receive or send IAT-formatted items. These results indicate that additional preparation is needed on the part of financial institutions to ensure that their customers are also ready for September IAT implementation.

Resources to boost preparedness

The Federal Reserve Banks continue to offer IAT education and tools to help you prepare for implementation via the IAT Resource Center. Become familiar with these resources to help ensure 100 percent readiness.

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