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International ACH Transaction (IAT) Frequently Asked Questions

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General Questions

Format Questions

This section includes questions related to IAT record layouts and format considerations.

OFAC Questions

This section includes questions related to Office of Foreign Assets Control (OFAC) compliance and related responsibilities of financial institutions.

FedACH Services Questions

This section includes questions related to FedACH testing availability, gateway operator vs. ACH operator roles, processing differences, and FedACH International enhancements.

General Questions

Q: What is IAT?

A: IAT is a new standard class entry (SEC) code that will replace the CBR and PBR SEC codes that are currently in use today. NACHA rules will require the IAT code and format of all ACH payments entering or exiting the U.S.

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Q: What major changes can institutions expect with the new IAT SEC code?

A: The IAT SEC code will be used for both consumer and corporate international ACH credits and debits. In addition to requiring data elements defined by the Bank Secrecy Act’s (BSA) "Travel Rule", OFAC screening indicators will be included with each payment to help RDFIs identify suspicious payments. Furthermore, all international inbound transactions will allow the use of a secondary SEC code to further identify the file type for all WEB, TEL, ARC, POP, BOC, and RCK transactions where applicable.

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Q: Why is the implementation of IAT necessary?

A: IAT was developed to respond to OFAC’s request to align the NACHA Rules with OFAC compliance obligations and to make it easier for RDFIs to comply with those obligations. In the current environment, many U.S. financial institutions are receiving international payments that cannot be properly identified. These unidentifiable payments enter the U.S. through correspondent banking relationships and are often difficult to trace or accurately process as international payments. The new IAT code supports the end of anonymity and promotes traceability of international electronic payments.

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Q: When will the new IAT SEC code become effective?

A: The new IAT SEC code will become effective on September 18, 2009. This means that all items intended to process on that day must use the IAT code and contain all the new field requirements. As of September 18, 2009 the CBR and PBR codes will no longer be accepted. Overlap of CBR and PBR codes will be allowed for return and NOC items only until December 31, 2009.

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Q: Who will the IAT SEC code impact?

A: The introduction of the IAT code will impact all U.S. financial institutions, including those that do not currently send or receive international payments as any financial institution is a potential receiver of an IAT transaction.

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Q: When is the right time to begin preparing for IAT?

A: Now is the time to prepare for IAT. Multiple internal and external partners may be necessary to ensure that your institution’s ability to identify and format international ACH payments is in place prior to September 18, 2009.

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Q: Who will be able to help my institution prepare for IAT?

A: There are many resources to help your institution prepare. Internally you may want to reach out and begin planning with your ACH operations, compliance and customer service areas. External partners will most likely include your Regional Payments Association (RPA), ACH Operator and ACH vendor.

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Q: Do OFAC Rules apply to international ACH transactions?

A: Yes, OFAC rules apply to all payments, both domestic and international. DFIs and their customers should consult with their internal compliance officer on their requirements. Further information can also be found on the OFAC Web site (Off-site Link).

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Q: Should a DFI test with its gateway operator?

A: All DFIs are encouraged to test their ability to successfully send and/or receive international transactions in the IAT format and are encouraged to test sending and/or receiving returns. Contact your ACH Operator to schedule testing.

Format Questions

Q: What information should we expect to include in the mandatory addenda records for IAT?

A: The new format will accommodate the following data elements:

  • Originator's name/address
  • Beneficiary's name/address
  • Originating bank name/ID/branch code
  • Foreign correspondent bank name/ID/branch code
  • Receiving bank name/ID/branch code
  • Reason for payment

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Q: Does the Foreign Correspondent Bank Information addenda record relate to the correspondent bank of the receiving depository financial institution, or the foreign originating financial institution?

A: The Foreign Correspondent Bank addenda record refers to the correspondent bank of the foreign originating financial institution and is used only with inbound items.

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Q: Will the ACH Operators edit an IAT entry if the maximum number of addenda records is exceeded?

A: ACH Operators will reject an IAT item when the maximum number of addenda records [12] is exceeded. Similarly, if the number of addenda records entered in Field 5 of the entry detail record does not match the number of actual addenda records edited, the item will also reject.

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Q: How many digits should be used for the ISO Destination Country Code given that the addenda record has a three-character field?

A: Although the ISO Destination Country Code field found in the Company/Batch Header Record is two digits in length and the Originating DFI Branch Country Code field found in the addenda record is three digits in length, all ISO country codes are to be identified using a two digit alpha designation.

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Q: Where in the IAT Detail Record will the OFAC screening indicator be located?

A: There are two OFAC screening indicator fields in the IAT Record:  In the Entry Detail Record, Field 10 is the Gateway Operator OFAC Screening Indicator, and Field 11 is the Secondary OFAC screening indicator.

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Q: What is the purpose of the IAT transaction type code field?

A: The reason for payment must be included in IAT entries to provide relevant information in support of Regulation E.  The IAT transaction type code field is a required field that will carry the three-character code indicating the reason for payment.  Reason for payment is currently used for CBR / PBR transactions and the code listing can be found in Section 2.2 “Code Values” of the NACHA Rules book.  With IAT, the use of the transaction type code field will be expanded for inbound IAT transactions to carry a secondary SEC code for WEB, TEL, ARC, POP, BOC, RCK, POS, SHR and MTE.

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Q: Where can I find examples of detailed record layouts for IAT?

A: You can find extensive information about the new IAT format in the section of the 2008 ACH Rules entitled 2009 Rules Changes. To purchase your copy of the ACH Rules, please contact the nearest regional payments association which can be found through the following URL: http://www.nacha.org/map/nacha_map.html (Off-site Link).

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Q: Will a special routing number be used in the GO Identification/Receiving DFI Identification field in the IAT detail record for outbound IAT entries?

A: The GO Identification/Receiving DFI Identification field in the IAT entry detail record will be populated just as CBR and PBR entries are formatted today.  An RTN is currently used to represent each FedACH International Service country.  The RTNs of the service countries can be found in each corresponding FedACH International Service Manual.

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OFAC Questions

Q: Who is responsible for OFAC compliance?

A: All depository financial institutions, whether originating or receiving, are responsible for OFAC compliance.  Likewise, OFAC compliance applies to third-party service providers, including processors and correspondent/respondent banks.  Although a financial institution might contract with a third-party provider to do the actual OFAC review of the transactions, OFAC rules clearly indicate that a financial institution cannot contract away its liability for OFAC compliance.

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Q: Do OFAC rules apply to international ACH transactions?

A: Yes.  OFAC rules apply to all payments, both domestic and international.  Depository financial institutions and their customers should consult with their internal compliance officer on their organizations’ requirements.  Further information can also be found on the OFAC Web site, http://www.treas.gov/offices/enforcement/ofac/ (Off-site Link).

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Q: What role does a gateway operator play in OFAC requirements?

A: Gateway operators are required to perform OFAC screening on all incoming IAT items.  The gateway operator will flag each item with either a “1” to indicate a possible hit or a “0” to indicate that there was no hit.  ACH operators acting as gateways operators are not required, however, to validate potential hits and will not block transactions or freeze funds.  ODFIs acting as gateway operators, on the other hand, do have additional OFAC obligations.  Please consult with OFAC for more information. Contact information can be found through the following URL: http://www.treas.gov/offices/enforcement/ofac/ (Off-site Link)

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Q: Where in the IAT Detail Record will the OFAC screening indicator be located?

A: There are two OFAC screening indicators for IAT records: in the Entry Detail Record, field 10 is the Gateway Operator OFAC Screening Indicator, and field 11 is the Secondary OFAC Screening Indicator.

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Q: If a gateway operator is going to perform OFAC due diligence on inbound IATs, what additional responsibilities does an RDFI have surrounding OFAC compliance?

A: Ultimately, the receiving financial institution bears all responsibility for OFAC compliance.  Although the gateway operator will perform inbound screening on inbound IAT items and populate the necessary fields, the receiving financial institution is still required to perform the necessary due diligence on IAT items in order to properly comply with OFAC obligations.

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Q: Will the Federal Reserve perform OFAC screening on all IAT items flowing through the ACH network?

A: No.  The Federal Reserve, in its capacity as a gateway operator, will only perform OFAC screening on those incoming IAT items that flow through FedACH International® Services.  Inbound IAT items entering the country through another gateway operator will not be screened by the Federal Reserve but rather by that gateway operator.

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FedACH Services

Q: Will the Federal Reserve allow depository financial institutions to test the IAT SEC code?

A: Yes, the Federal Reserve will make IAT testing available in 4Q2008 through the implementation date of September 18, 2009. Depository financial institutions may schedule testing using the FedACH Online Scheduler.

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Q: Will the Federal Reserve conduct OFAC screening for IAT items?

A: Yes, the Federal Reserve acting as a gateway operator will screen any inbound IAT items that are processed as part of our FedACH International Services. As an ACH operator, the Federal Reserve is not obligated to screen IAT items coming from or to other ACH participants including other U.S. gateway operators.

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Q: Will the Federal Reserve, acting as a gateway operator, allow inbound debit entries through FedACH International Services?

A: No, the Federal Reserve, acting as a gateway operator, will not allow inbound debit entries through FedACH International Services. The reasoning is because the Federal Reserve cannot offer the same warranties as an ODFI to ACH network participants regarding IAT items. ODFI warranties are outlined in the NACHA Rules.

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Q: What will the Federal Reserve do if it finds a match on the OFAC SDN list?

A: The Federal Reserve acting as gateway operator will populate the Gateway Operator OFAC Screening Indicator, field 10 in the IAT entry detail record, with either a “1” to indicate a possible match or a “0” to indicate that there was no match. The Federal Reserve will not hold, pend or reject any IAT item, regardless of whether that item has been flagged as a potential match.

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Q: Will the Federal Reserve support prenotification and notification of change entries for international ACH items?

A: As an ACH operator, the Federal Reserve will process all IAT items according to the ACH Rules, which allow for prenotification and notification of change (NOC) entries. However, as a gateway operator, the Federal Reserve will apply edits according to FedACH International Services specifications and business operating procedures. These differences include, but are not limited to, prenotifications, NOCs, recalls and reversals. For additional details regarding FedACH International Services, please refer to the appropriate service implementation manual.

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Q: Will a special routing number be used in the GO Identification/Receiving DFI Identification field in the IAT detail record for outbound IAT entries?

A: The GO Identification/Receiving DFI Identification field in the IAT entry detail record will be populated just as CBR and PBR entries are formatted today.  An RTN is currently used to represent each FedACH International Service country.  The RTNs of the service countries can be found in each corresponding FedACH International Service Manual.

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Q: Will I be able to use FedACH Information Services (via the FedLine Web or FedLine Advantage access solutions) to derive IAT return items?

A: Yes, the “Derive a Return Item” feature in the FedLine Web access solution will be updated to support the return of IAT items.

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Q: Will the Federal Reserve offer any tools or services that will help my institution monitor IAT items?

A: The Federal Reserve will offer the following tools that will readily identify IAT items sent to RDFIs:

  • The Federal Reserve will offer the ability for Receiving Points and RDFIs to choose to receive their IAT items in a separate file from their domestic items. The file will include all IAT forward items, but will not contain IAT return items. It is important to note that the file will contain all IAT items destined for RDFIs, both from FedACH International Services and from other ODFIs acting as gateway operators. The IAT files will be available during each FedACH distribution window and will follow FedACH standard processing. Sign up will be available through the FedACH Participation Agreement. It will allow Receiving Points and RDFIs to easily identify IAT items to perform necessary due diligence (i.e., OFAC screening) without having to interrogate the entire output file.  This will result in potential overall processing efficiencies. The pricing structure is anticipated to be a fixed monthly fee.
  • FedEDI® Plus will offer a report of all IAT items for a given business day at the RDFI and (or) the customer level. End-of-day reports can be generated automatically on a fixed schedule or requested “on demand” for various date ranges. Reports will include all relevant payment information in a user-friendly layout and will be available in various user-selected formats (e.g., PDF, TXT, HTML). Established FedEDI Plus fees will apply to IAT reports.

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Q: Will FedACH International Services expand its service offerings with the implementation of IAT?

A: FedACH International Services is currently exploring opportunities to expand the countries accessed as well as product features. To receive the latest news about FedACH International enhancements, sign up for Email Alert Notification on FRBservices.org and select FedACH Services.

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Q: What paperwork does an institution need to complete to participate in each of the FedACH International Services?

A: Prior to participation, a DFI should complete and return the Service Request Form to the FedACH Services Sales Specialist at is servicing Reserve Bank. You may complete one form for all or any of the FedACH International Services. The forms are available in the respective Service Implementation Manuals for each partner country, which are available on the FedACH International Processing Resources.

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