Academic journal article ABA Banking Journal

Handling Major Headaches: ACH Meets OFAC

Academic journal article ABA Banking Journal

Handling Major Headaches: ACH Meets OFAC

Article excerpt

Automated clearinghouse transactions and ACH network participants are now under the compliance scrutiny of the Office of Foreign Asset Control. This change in policy has brought on additional compliance burdens.

The National Automated Clearinghouse House Association (NACHA) amended its operating rules as of May 1997 in response to OFAC's decision, in June 1995, to reverse its prior policy of treating fully automated transactions differently than manually processed payments for purposes of assessing civil and criminal penalties.

OFAC expects that the ACH system will not be used for any transaction in violation of U.S. law. OFAC maintains that the originating depository financial institution (ODFI) and the receiving depository financial institution (RDFI) are equally responsible for freezing proceeds of ACH transactions involving interests of blocked entities. OFAC is especially concerned about cross-border ACH payments originated or received in the U.S.

However, OFAC limits the liability for inadvertent processing of domestic ACH transactions to the RDFI holding the account of the blocked entity. Because the majority of ACH transactions are batched, OFAC acknowledges that the receiving institutions (RDFIs) are responsible for identifying and returning ACH debits that are intended for blocked accounts. …

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