Alert your Finance people: New international banking regulations that take effect in September affect how direct deposits are handled.
The new international ACH transaction (IAT) rules, effective 9/18/09, require new codes and formats that will replace those used today on direct deposits. NACHA rules will require the IAT code and format on all ACH payments involving a non-U.S. bank. Those that don’t have it may not be processed.
Many employers (and banks, for that matter) mistakenly believe that if they don’t currently make cross-border payments, the IAT rules don’t apply to them. That’s not necessarily the case.
For example, take a foreign-owned subsidiary in the U.S. that gets money from a parent company, or a joint venture or partnership that receives money from abroad to fund payroll. They’ll all be subject to the IAT rules. Even small firms may have foreign investors or affiliates, or funds may flow between affiliated companies in different countries – which means the IAT rules apply to them, too.
Decide for yourself
To decide whether your company’s affected, ask these questions – if you answer “yes,” the IAT rules apply:
1. Are any ACH transactions in the file destined for foreign bank accounts?
2. Is funding for the ACH transactions from a foreign bank account? And, if so, is the funding specifically for a payroll or other ACH payment?
Since affected employers’ direct deposits must be in the IAT format:
• check with your bank to ensure it’ll comply by the effective date, and
• make sure you’re able to originate direct deposits with the additional info the regs will require you to provide (e.g., employee and bank addresses).
For more information, check the FAQs on the Federal Reserve Board’s Web site.
