Certified Bank Secrecy Act Professional Practice Test

OFAC compliance for outbound IAT rests with the Originating Depository Financial Institution (ODFI). Since the ODFI is the bank that creates and transmits the payment instruction, it has the control and access to the payer’s information and can screen the item against sanctions lists before it leaves the institution. If the ODFI fails to screen and the item is sent into the ACH network, the bank bears the regulatory risk and could face penalties, so the obligation to verify and block sanctioned transactions sits with the ODFI.

The Receiving Depository Financial Institution (RDFI), which processes inbound items for the recipient, plays a role in handling and posting payments it receives, but it does not have the same ability to assess the payer’s sanction status in the moment of origination. Relying on the RDFI to perform the initial OFAC screening would delay or undermine the preventive controls that are essential for outbound transactions. Therefore, the best practice and regulatory expectation is that the originator’s bank conducts the OFAC checks for outbound IATs.