A Cross-Border ACH (International ACH Transaction, or IAT) is an ACH payment that involves a financial agency outside the United States in the payment chain — either the originating or receiving depository financial institution is located outside the U.S. IATs are governed by Nacha Operating Rules (nacha.org) and subject to OFAC screening, FinCEN BSA requirements, and, for consumer transactions, Regulation E. IATs are used for cross-border payroll, supplier payments, and remittances.
The IAT (International ACH Transaction) is a Standard Entry Class (SEC) code in the Nacha ACH network that identifies transactions crossing into or out of a foreign jurisdiction. Nacha adopted the IAT in 2009 to comply with FinCEN regulations requiring enhanced data elements for cross-border electronic payments — specifically, the payment chain identifiers needed to comply with OFAC screening obligations and the Bank Secrecy Act's travel rule for international transfers. Why IAT exists — regulatory backstory: Before 2009, cross-border ACH transactions were processed under domestic SEC codes (PPD, CCD, CTX) without distinct labeling, making it difficult for financial institutions to screen for OFAC-prohibited parties or apply BSA monitoring. FinCEN's 2008 rule (31 CFR Part 1020) required financial institutions to identify and screen IAT transactions. Nacha implemented the IAT code as the technical mechanism for compliance. See nacha.org/iat-transactions and federalreserve.gov for the ACH and IAT regulatory framework. Data requirements distinguishing IAT from domestic ACH: IAT addenda records carry additional data fields not required in domestic ACH: (1) originator name and address; (2) originating DFI name and ID; (3) receiving DFI name and ID; (4) foreign correspondent bank information (if applicable); (5) foreign payment amount and currency if the receiving account is denominated in foreign currency. ODFI (Originating Depository Financial Institution) must populate all IAT addenda fields for OFAC and BSA screening by receiving banks. OFAC screening requirement: Both the ODFI and the RDFI (Receiving DFI) are required to screen IAT transactions against OFAC's Specially Designated Nationals (SDN) list and other restricted party lists before transmitting or settling. See treasury.gov/ofac for the current SDN list and screening guidance. ODFI failure to screen IAT transactions properly can result in OFAC civil money penalties. Costs and settlement: IAT transactions settle through the U.S. ACH network (operated by The Clearing House and the Federal Reserve's FedACH), which interfaces with correspondent banking relationships and, for some corridors, direct bilateral exchange agreements. IAT settlement is typically next-day (standard) or same-day (same-day ACH, adopted by Nacha in 2016). IAT fees are generally higher than domestic ACH due to compliance overhead — $0.25-$2.00 per transaction depending on institution and corridor, vs. $0.02-$0.10 for domestic ACH. Limitations and use cases: IAT is available only for corridors where the U.S. financial institution has a bilateral or network ACH exchange agreement with the foreign jurisdiction. The U.S. has IAT corridors with Canada (through the Canadian Payments Association), the EU (through SEPA gateway arrangements at some banks), and select Latin American countries. For corridors without IAT exchange agreements, international wires (SWIFT MT103) remain the standard. Common IAT use cases: cross-border payroll for U.S. companies with Canadian employees, supplier payments to Mexico, and consumer remittances under Regulation E.
A domestic ACH transaction (PPD, CCD, CTX) involves only U.S. financial institutions and U.S. accounts. An IAT (International ACH Transaction) involves a financial institution outside the U.S. in the payment chain. IATs require additional addenda records with originator, DFI, and foreign bank details to support OFAC and BSA screening. IATs are subject to Regulation E disclosures for consumer transactions (Nacha and CFPB's international remittance transfer rules). See nacha.org for the full IAT Operating Rules.
Yes. Both the ODFI and RDFI must screen IAT transactions against OFAC's SDN list and other applicable sanctions lists before transmitting or settling. See treasury.gov/ofac for OFAC guidance on ACH screening obligations. Financial institutions that process IAT transactions without OFAC screening can face civil money penalties. Most banks use automated OFAC screening tools integrated into their ACH processing systems.
Yes, if the business's bank supports IAT for the relevant country corridor and the payment amount is within the bank's IAT limits. IAT works well for recurring cross-border payments (payroll, recurring supplier invoices) in corridors with established ACH exchange agreements. For one-off or high-value international payments, SWIFT wire transfers (MT103) remain more universally available. Ask your bank whether IAT or wire transfer is better for your specific corridor and payment size. For business financing needs, apply.