Cardinal Bank

International ACH Transactions

On September 18, 2009, the National Automated Clearing House Association (NACHA) will implement an amendment to the NACHA Operating Rules that has the potential to impact many U.S. businesses that send or receive electronic payments through the Automated Clearing House (ACH) Network. All participants in the ACH Network are bound by contract to comply with the NACHA Operating Rules.

The new rule will require all payments processed through the U.S. ACH Network that are funded from accounts domiciled outside of the U.S. or sent to a country outside of the U.S., be classified as International ACH Transactions (IAT) using a new Standard Entry Class (SEC) Code, IAT.

IAT's are identified based on the following criteria:

• If the transaction is processed through the U.S. ACH system
• The source of funding
• The location of the financial agencies that handle the payment transactions

Therefore, certain transactions currently formatted as domestic transactions, but funded from accounts domiciled outside of the U.S., will need to be sent as IATs.

Questions
If you have questions regarding the NACHA rule change, please contact cmcs@cardinalbank.com.

What's in the amendment?

This amendment will require all payments funded internationally or sent to another country via the ACH Network to:

1) Be identified as International ACH Transactions (IAT) using a new Standard Entry Class (SEC) Code-IAT
2) Include specific data elements defined by the Bank Secrecy Act's (BSA) "Travel Rule" (i.e., Originator name, address, account number, Originator's depository institution name and payment amount; Receiver name, address, account number; and the Receiver's financial institution)

The new amendment will identify International ACH Transactions by focusing on where the financial agency that handles the payment transaction is located. Thus, certain transactions currently formatted as domestic transactions, but are funded internationally, will need to be sent as IATs.

Why the change?

The change will enable corporations, financial institutions and regulators to easily identify all international payments flowing through the ACH Network and all parties involved in the tranasactions, making it easier for everyone to comply with U.S. law. It will enable ACH transactiona to receive the same level of screening as International Wire Transactions.

How do you determine if the IAT applies to your company?

• If your company sends payroll, pension or benefit payments via the ACH Network to individuals that have permanent resident addresses outside the territorial jurisdiction of the United States you may be required to use the IAT to send these payments.
• If your company is a subsidiary of a multi-national company or has foreign subsidiaries there is a strong possibility that the implementation of the IAT will impact your ACH processing.
• If your company buys or sells to organizations or individuals outside the territorial jurisdiction of the United States you need to talk to your financial institution about the impact of the IAT to your company.

If any of these situations apply to your business or you have questions about the change to NACHA rules, please contact cmcs@cardinalbank.com.