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Nacha was created to ensure that all ACH network requirements and rules are followed. They also provide clear guidance to all of the banks in their network so that they maintain strict executive and federal legislation compliance.
What is Nacha?
National Automated Clearinghouse Association (Nacha) is responsible for the ACH Network:
Nacha has over 440 members, all of which work together to enforce compliance with the rules and procedures that Nacha puts forth. Additionally, the financial institutions that are part of the Nacha network fund the very nonprofit that is responsible for governing them.
What are Nacha rules?
Nacha’s rules are the foundation of the ACH payment system. The requirements of Nacha can be broken down into multiple categories, including:
- Secure transition and storage of all sensitive data. Nacha requires that all sensitive information sent online be encrypted. Additionally, sensitive information that is sent, received, or stored must be encrypted. Email used in any of this activity, as well as forms, must also have encryption enabled.
- Safe paper document storage. Hard copies of any customer data must be kept in safe locations with strict employee access controls and placed in a locked and secure storage space.
- Routing number validation. All members must take strict measures to ensure that customer routing numbers are valid.
- Customer identity verification. Any time ACH is used, it’s up to businesses to make a reasonable effort to validate the customer’s identity. Verification can take place online or by phone, but all measures must be taken to validate that the person is who they say they are. You may need to validate a person through deposit test amounts, third-party validation, driver’s license number, and other procedures.
- Remain reasonably diligent about fraud. Businesses must maintain what is considered “commercially reasonable” diligence when dealing with fraud. It’s up to business owners to ensure that transactions are not fraudulent. Payment processing systems used in your place of business should have fraud detection measures in place, such as detecting fraudulent patterns or searching for suspicious activity or duplicate transactions.
- Maintain strict and clear security policies. All merchants must have security policies that dictate how sensitive data is accessed, transmitted, and stored. Your policy should include a section on customer identity verification, too.
Nacha provides annual rules and guidelines that all members must know and adhere to when using ACH payments. You can view the latest operations rules and compliance guidelines on the official store.
What is Nacha compliance?
The rules listed above are just a few of the many you’ll need to follow to maintain Nacha compliance. It’s important to purchase a copy of the Nacha rules publication to ensure that you comply and follow the best practices for ACH transactions.
Nacha rules and regulations cover:
- Requirements for data security
- Rules for credit and debit card transactions
- Guidelines for using the ACH network
- Member roles and responsibilities
Those who aren’t compliant with Nacha rules can be reported and evaluated by the compliance team. Hefty fines can be assessed if you don’t follow the rules, so it’s crucial to take compliance seriously.