NACHA: Request for Comment on IAT Modifications

​ABA Contact: Steve Kenneally
Published Proposal: August 15, 2012
Comments Due: September 24, 2012
Disposition: Filed

Summary of the Proposed Rule:

The NACHA proposal would amend three portions of the rules related to International ACT Transactions (IATs). The amendments are intended to eliminate ambiguities and provide additional clarity to the rules related to IAT formats. The changes are meant to create clearer definition and more consistent use of IAT formats in international transactions. Ultimately, this should increase the transparency of these transactions, reducing the risk of having a transaction directed to a blocked party proceed undetected.

NACHAs’ specific intentions with regard to this proposal are to:

  • Clarify the Manner in which countries must be identified within an IAT entry, eliminating the potential for ambiguity in identifying countries to or from which IAT entries are directed.
  • Standardize a process to enable the identification of the ultimate beneficiary in certain international payment models that utilize the IAT entry.
  • Narrow the scope of the ODFI warranty for Outbound IAT transactions.

Proposed Rule:

Clarify that the country named within certain fields of an IAT entry are identified using that country’s ISO Country Code as defined by the International Organization for Standardization (ISO).

This would remove ambiguity regarding coding requirements for the originator and receiver fields. It is not clear whether the country name should be abbreviated, spelled out, or assigned the ISO Country Code. The rule change would require that the ISO Country Code be used in these fields.

Proposed Effective Date: March 21, 2014

Establish a new Gateway obligation to identify, within an Inbound IAT entry, the ultimate beneficiary of the funds transfer when the proceeds from the Inbound IAT debit are for further credit to an ultimate beneficiary that is not the originator of the IAT entry.

This change is proposed to reflect that the original IAT rules envisioned a two party system where the originator of the IAT debit would be the direct recipient of the funds. However, it is now known that some IAT debits are originated by third party service providers where the funds are ultimately transferred to another recipient.

Proposed Effective Date: March 21, 2014

Revise the current ODFI warranty of compliance with foreign payment system rules for Outbound IAT Entries, narrowing its scope to focus only on authorization of the Entry when such authorization is required by the laws or payment system rules of the receiving country.

Currently, ODFI warranties for Outbound IAT Entries are broad and require the ODFI to be in compliance with ALL laws and payment system rules in the receiving country. The proposed rule change would limit the warranty to validating the authorization of the entry. This may encourage more financial institutions to engage in Outbound IAT Entries.

Proposed Effective Date: March 15, 2013