Update at a Glance

May 7, 2008

NACHA Rule Change Signals Wide-sweeping Revisions to ACH Transactions

A significant new NACHA (The Electronics Payments Association) regulation, effective as of September 18, 2009, will drastically change the rules currently governing automated clearing house (ACH) transactions. A main requirement of the new rule change — the most significant to the ACH network since its inception — requires that all international payments made via the ACH network be identified as such via a new Standard Entry Class (SEC) Code known as IAT (International ACH Transaction). The rule change holds further significance in that it reclassifies some transactions that are currently treated as domestic as IAT.

The change is designed to help Depository Financial Institutions (DFIs) more easily comply with U.S. law to identify payments that have initiated internationally and have entered the U.S. ACH network through correspondent banking relationships. Currently, many such international payments cannot be identified correctly by Receiving Depository Financial Institutions (RDFIs), and become incorrectly classified as domestic transactions.

Because of this reclassification, ACH service customers need to understand the nuances of this rule for proper identification of what will be considered international ACH transactions.

Additionally, provisions of the new rule will require that IAT payments include specific data that, according to the Bank Secrecy Act's "Travel Rule," will help RDFIs further comply with the Department of the Treasury's Office of Foreign Assets Control sanctions. The data will need to include:

• Originator name, address, account number
• Originator's depository institution name and payment amount
• Receiver name, address and account number
• The receiver's financial institution

Given the significance of this rule change, penalties for noncompliance can be severe and include substantial fines as well as sanctions. Visit www.nacha.org/IAT_industry_information/ to read more about this important amendment and ways that your organization can prepare for the impending regulations.

For more information, call us at 1 800 424-3004 or e-mail us at treasury@bnymellon.com.