What is a sanctioned entity?
A sanctioned entity is a company, country, or individual that is prohibited from conducting business in a certain jurisdiction. In many cases, …
The National Automated Clearing House Association, known as Nacha, is the independent organization tasked with managing ACH payments. Nacha is owned by a group of credit unions, banks, and payment processing companies. This group oversees and facilitates electronic payments. ACH payments transfer money between bank accounts without using a check, wire transfer, cash, or credit card.
Nacha isn’t the same as ACH. An ACH network is the mode by which payments are transmitted, while Nacha is the organization that oversees the electronic payment network. Nacha sets the operating rule that each ACH transaction must follow. Most businesses now use some form of ACH to remit payments.
Nacha was originally created in 1974 after the merger of several regional US banks. Nacha was primarily used to process direct deposits, pay benefits, and automate credit card transactions. Following the passage of the Affordable Care Act, Nacha was the processor of health insurance payments. Today, Nacha is still the primary facilitator of benefit plan payments using their HIPPA-compliant protocols.
Nacha also works closely with different government agencies in the United States, such as the Federal Reserve, the U.S. Treasury, and state banks, to prioritize the integrity of electronic payment processing. In 2019, Nacha unveiled another initiative called the Faster Payments Playbook, which looks to share the same business payment processing benefits with individuals. Individuals are now able to send and receive payments through the ACH system.
Nacha has a variety of roles and responsibilities. Here are some of Nacha’s key responsibilities:
A Nacha file is a document that outlines the information related to the ACH transaction. This information needs to be presented in a certain way to be processed through Nacha’s system. While there are some changing variables based on the type of transaction, every payment must contain the following information:
In addition, Nacha file requirements must conform to character length requirements. Due to the specificity of Nacha file formats, many banks and financial institutions will create and process ACH files on your behalf.
Nacha has well-defined operating rules that each participant must follow when using the ACH network. These regulations aim to reduce financial fraud and streamline the payment process for all involved parties. Here are some of the main Nacha rules:
Nacha operating rules vary by jurisdiction. For example, the United States might have different payment regulations compared to the European Union. Understanding which regulations your business must follow is important to avoid warnings, fines of up to $500,000 per month, and permanent suspension from the ACH network.
Remember, Nacha rules are subject to change. Consistently checking for updates or investing in payment management software are great ways to maintain compliance.
Summary
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End-to-end B2B payment protection software to mitigate the risk of payment error, fraud and cyber-crime.