key-elements-of-nacha-rules-compliance

The Key Elements of Nacha Rules & Compliance

Nacha rules and compliance standards play an important role in ensuring all ACH transactions on the network function securely, smoothly, and swiftly to provide same-day ACH payments

What Is Nacha?

Nacha stands for the National Automated Clearing House Association. It defines and oversees the implementation of guidelines for businesses to follow so they’re Nacha compliant. Compliant ACH network participants can make ACH transfers on the network. This includes certain roles and responsibilities both financial institutions in a transaction must follow in an ACH transfer, and other detailed rules. What is Nacha? Learn more about Nacha and ACH.

Who Needs To Be Nacha Compliant?

Any company who accepts ACH payments from consumers, including if they use a third-party service for processing, has a responsibility to ensure their business is compliant with Nacha’s operating rules and guidelines. By following Nacha rules and guidelines, the ACH transfer system will function more efficiently and in the best interest of businesses, individuals, and financial service providers alike. 

 

A Snapshot of Nacha Compliance Standards 

Nacha Compliance Standards are robust and go into much more detail than what is broken down below. If you provide ACH payments, following these rules will not ensure your business is Nacha compliant; this is just a brief summary. You’ll need legal counsel to understand the rules themselves.

Secure Transmission & Storage of Sensitive Data

Any information that is sent, received, or stored online must be encrypted. Sensitive information is anything that is not public information such as bank account numbers, social security numbers, or driver’s license numbers. 

If hard copies of anything containing sensitive data are being saved, reasonable precautions need to be taken to ensure their security. Your organization should have clear security requirements outlining the steps you're taking to protect customers and provide secure data

Fraud Prevention & Risk Management

Companies are responsible for making sure the ACH transactions they initiate are not fraudulent. Payment processing systems should have fraud detection policies in place to verify sensitive data in a transaction, mitigate fraud, and reduce risk. To address digital payment and fraud growth, Nacha is adding requirements to strengthen protections for individuals, merchants, and financial service providers.

Account Validation

Get peace of mind about the validity of a source account through account validation. It’s a new Nacha requirement for businesses that debit funds from ACH payments, which goes into effect in March 2021. This helps you determine if an account is authentic or not.

 

Account Verification

Once you know an account is real, take the next step with account verification so you can ensure the validity of an account’s ownership and available funds.

 

Identity Verification

Through identity verification, you can make sure an account owner is who they say they are by verifying their personal information such as social security number or driver’s license number.

 

Transaction Verification

An account can further be authenticated through transaction verification. It includes analyzing the transaction data of an account to identify fraudulent behavior quickly and easily.


 

The ACH Compliance Audit Requirement

Every year, Nacha requires all participating financial institutions in the ACH Network to conduct audits to ensure compliance with ACH rules.

Envestnet | Yodlee strives to meet and exceed industry best practices for data security, regulatory compliance, and privacy. We can help your business meet Nacha compliance standards as regulatory requirements and security needs in the ACH transfer system continue to grow in complexity and the ability to deliver customers quick and easy digital transactions becomes more and more essential.