International ACH Transaction Rules
New rules affecting International ACH transactions (IAT) went into effect on September 18, 2009. NACHA, the association that oversees the U.S. electronics payments network, issued the changes to its operating guidelines in response to a request from the Office of Foreign Assets Control (OFAC), an arm of the Treasury Department. OFAC is charged with administering and enforcing U.S. economic and trade sanctions combating money laundering, narcotics trafficking, and terrorism. Penalties for failure to comply with OFAC requirements may include incarceration of employees and fines ranging from $10,000 to $10 million. The IAT rules only apply to transactions using the U.S. ACH network, not wire transfers or payments made through a financial institution’s proprietary network.
Willamette University, as an originator of ACH payments (in our case, direct deposit of financial aid refunds, payroll & employee/student reimbursements), is required to exercise due diligence in determining whether or not a transaction is an IAT. The direct deposit enrollment Terms & Conditions mentioned students/employees that transfer the full amount of payment to their financial institution outside the U.S. are prohibited from enrolling the direct deposit program. Payments of this nature will be processed by paper check. IAT file formatting requires extensive programming on the University’s part, which the institution has opted not to do at this time.
Employee Responsibility (ACH/Direct Deposit)
If you bank only within the U.S. and currently do not or will not, at some point in the future, forward your direct deposit (ACH payments) to non-U.S. banks, then no action is required on your part.
If you currently forward, or in the future plan to forward, all (100%) of your direct deposit (ACH payment(s) to a non-U.S. bank; steps must be taken immediately to inactivate or change the deposit information that is currently on file in the Payroll Office or in the Accounting Office. Fill out the OFAC Compliance Form and submit it to the Payroll Office immediately by e-mail at firstname.lastname@example.org or the Accounting Office at email@example.com. Failure to take action, and provide information about the foreign account, will result in your bank rejecting your payroll deposit or reimbursement/refund payment, returning the funds to Willamette University, and the Securities and Exchange Commission potentially assessing a penalty. Willamette University is not responsible for any international ACH transactions that are rejected or delayed due to missing information.
Why is this new bank regulation necessary?
The international ACH transfer regulation aligns the NACHA Operating Rules (Rules) with OFAC (Office of Foreign Assets Control) compliance obligations and allows intermediaries, such as Willamette University, a means to be compliant by classifying payments involving financial agencies outside the territorial jurisdiction of the U.S. and include the Bank Secrecy Act’s (BSA) “Travel Rule” information within the international payment format by identifying all parties to the transaction. The goal of the new bank regulation is to prevent U.S. organizations from doing business with blocked foreign entities. The new international ACH transfer bank regulation provides more visibility into the process.