The revised EU transfer of funds regulation now means that certain transfers must include information on the payee in addition to the payer.
Adopted by the European Parliament in May 2015, the second iteration of its transfer of funds regulation is known in the UK as the ‘Wire Transfer Regulation’ or sometimes 2WTR for short. It covers funds transfers, in any currency, sent or received by a payment service provider (including intermediaries) established in an EU Member State.
As EU Regulations have direct effect in Member States, there is no need for national implementing legislation – in contrast to the Fourth Money Laundering Directive for example.
It is worth noting that “in order to ensure the smooth introduction of the anti-money laundering and terrorist financing framework” the new regulation won’t apply until the deadline for transposition of 4MLD. Given that 4MLD has a two year implementation period that effectively means that 2WTR won’t apply until June 2017.
The regulation makes a number of changes, the biggest of which is the obligation to include payee information.
Information required for fund transfers to a non-EU recipient or intermediary institution
Under the regulation, fund transfers must be accompanied by:
• the name of the payer
• the payer’s account number
• the payer’s address, official personal document number (eg. passport), customer identification number or date and place of birth.
In addition, the payer’s PSP must include the name of the payee and the payee’s account number.
Before transmitting funds, the PSP must ensure that the information on the payer has been verified in accordance with AML requirements.
In short, the information accompanying a funds transfer must make clear who the funds are being transmitted from and to (and be verified).
Information required for fund transfers where institutions are in an EU state
Reduced information is required where all institutions in the chain are established in an EU Member State – the account numbers of the payer and payee can be transmitted.
Where reduced information has been provided and the transfer value is greater than € 1,000 the recipient or intermediary institution can request full information on the payer and payee from the originating institution. The payer’s PSP must provide the full information within 3 working days.
The payer’s PSP need only verify the payer information if the funds to be transferred were received in cash or anonymous e-money or there are reasonable grounds for suspecting money laundering or terrorist financing.
In our experience, firms that are making transfers to non-EU institutions tend to also apply the full information standard to their transfers to EU institutions rather than use the reduced information option.
The approach tends to be driven by payment system capability and requirements rather than adopting legal minimums.
Additional requirements for recipient and intermediary institutions
The payee’s PSP and intermediary PSP must detect whether:
a) the payer and payee information fields have been completed in accordance with the requirements of the payment system (eg. SWIFT validation protocols)
b) the required information on the payer or payee is missing.
Recipient and intermediary institutions should also reject transactions which are identified, upon receipt, as missing the required payer or payee information. Alternatively they should request and obtain the missing information prior to crediting the payee’s account or onwardly transmitting the payment.
Institutions should also take steps appropriate steps with respect to originating institutions which repeatedly fail to provide the required payer and payee information. These might include warnings, deadlines, rejection of future transactions, restriction of business, termination of relationship and notification to the regulator.
Recipient institutions (that is, the payee’s PSP) must ensure that prior to crediting funds to the payee’s account, that the payee information has been verified in accordance with AML requirements.
Finally, records including the payer and payee information and information as to how transactions with missing information were handled must be retained for 5 years.
These updates to wire transfer regulation present an opportune moment to have a look at your processes and plan for how you will meet the requirements by June 2017.