ACH/IAT Transactions and the Remittance Transfer Rule Safe Harbor

Do IAT transactions, where the Bank is solely the Receiving Depository Financial Institution (“RDFI”), need to be counted against the Remittance Transfer Rule’s one hundred transaction limit?

IAT transactions where the Bank is solely the RDFI do not need to be counted under the Remittance Transfer Rule’s one hundred transaction safe harbor.

Pursuant to Regulation E, 12 CFR section 1005.30(g), a “sender” is defined as follows:

“[A] consumer in a State who primarily for personal, family, or household purposes requests a remittance transfer provider to send a remittance transfer to a designated recipient.”

In the case of an ACH/IAT transaction, the sender, as the consumer and the Bank’s customer, is requesting a remittance transfer to be performed internationally, which would appear to make it a covered transaction.  However, where the Bank is operating solely as an RDFI to the ACH/IAT transaction, the consumer’s request for a remittance transfer is actually being made of the Originating Depository Financial Institution (the “ODFI”), operating in the capacity of the remittance transfer provider.  As such, the remittance transfer rules apply only to the remittance transfer provider who has been requested by the consumer to perform the remittance transfer, in this case the ODFI.  Thus, the Bank, operating solely as an RDFI in the completion of the ACH/IAT transaction, should not count the transaction against the safe harbor limitation, as defined in 1005.30(f)(2)(i)(A)&(B) of Regulation E.

This entry was posted on Monday, January 27th, 2014 at 4:18 pm.