New Banking Industry Rules
On September 18, 2009 the banking industry rules affecting electronic payments made through the Automated Clearing House (ACH) network were changed. The new rules impose new requirements on the originators of outgoing electronic payments ("ACH-Credits") and on the originators of incoming electronic payments ("ACH-Debits"). State of Wisconsin agencies originate ACH-Credits to pay a variety of Receivers such as vendors, employees, annuitants, benefit recipients and many others. State of Wisconsin agencies also originate ACH-Debits to collect money from a variety of Payers including individual and business taxpayers, licensees, and others. The new rules require state agencies to identify any ACH-Credit payments where the entire payment amount is subsequently transferred to a financial institution outside the US. The rules also require state agencies to identify any ACH-Debit payments that are funded by a transfer from a financial institution outside the US. The new rules are referred to as the "International ACH Transaction (IAT) rules" and are pursuant to requirements of the Office of Foreign Assets Control (OFAC).
Purpose of the IAT Rules
Under US Law, banks are required to screen all ACH payments to ascertain if the funds associated with a payment are being remitted to (or being received from) any party subject to OFAC sanctions. OFAC administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the United States. OFAC acts under Presidential national emergency powers, as well as authority granted by specific legislation, to impose controls on transactions and freeze assets under US jurisdiction. The IAT rules are intended to assist the banking industry in performing this screening process.
State of Wisconsin's Responsibility to Comply with the IAT Rules
In order for the State to comply with the IAT rules and the applicable US Law, Receivers of state agency-originated ACH-Credit payments, and Payers of state agency-originated ACH-Debit payments are being notified of the new rules, and their requirement to identify any transaction where a financial institution outside of the US is ultimately receiving or funding the payment amount. State agency forms used to collect ACH payment information from Receivers and Payers have been revised to include questions regarding the transfer of payments to/from financial institutions outside the US. For those payments identified as IAT, state agencies are required to submit all future electronic payments to the Receiver's/Payer's bank in a special format. If the Receiver/Payer does not provide the state agency with the information necessary for this special format, the agency must send a paper check to the Receiver or require that the Payer submit a paper check for the payment. In the case of vendors designated as an IAT Receiver, the State has elected to only remit payments to the vendor via paper check. The small number of IAT vendors does not justify the added cost the State would incur to create and submit the specially-formatted ACH file.
Receiver's Responsibility to Comply with the IAT Rules
Receivers of state agency-originated ACH-Credit payments must indicate on the state agency's ACH authorization form (provided in paper or on the Internet) whether the entire amount of the payment is being forwarded to a financial institution outside the US.
Payer's Responsibility to Comply with the IAT Rules
Payers of state agency-originated ACH-Debit payments must indicate on the state agency's ACH authorization form (provided in paper or on the Internet) whether the payment is funded through a transfer from a financial institution outside the US.
All questions should be directed to the state agency that originates your payment.