Just as i thought SEPA was done and dusted (dont forget about the October 2016 deadline!!), I am hearing about the need to comply with another set of payment regulations – FATF, Financial Action Task Force. I must admit i knew nothing about FATF , so went on the hunt for some useful information. This overview of the Financial Action Task Force may be basic for some, but i think it will provide a useful startpoint for many:
1. What is FATF?
FATF stands for Financial Action Task Force, and it is a inter-government body made up of 37 members. These guys are trying to lay down standards and guidelines (legal, regulatory and operational) to combat money laundering (ML), terrorist financing (TF) and other threats to the financial system.
2. Okay, so what has FATF got to do with Payments?
It is all about EU Regulation 2015/847, published on 5th June, 2015. Regulation 2015/847 is all about information accompanying transfers of funds and repealing (withdrawing) Regulation (EC) No 1781/2006. To be perfectly honest, I dont know what Regulation 1781/2006 is about. What’s important for us right now, is to understand what information accompanying transfers of funds is required under Regulation 2015/847
3. Oh Crap – So, what is Regulation 2015/847 ?
Basically, the EU is seeking to:
- Address problems of illegimate money transfers
- Prevent criminal/money launderers/financers of terrorism from exploing the ability to transfer money freely within the EU
- Tackle the above issues at a European level
- Adopt the International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation adopted by FATF on 16 February 2012 (the ‘revised FATF Recommendations’)
- On this point, the Regulation 2015/847 makes special reference to the FATF Recommendation 16 on wire transfers
4. Okay, so what does FATF Recommendation 16 on Wire Transfers state?
The FATF Recommendation 16 on wire transfers states (slightly edited):
- Wire payments need to state originator and beneficiary information:
- Financial institutions include required and accurate originator information, and required beneficiary information, on wire transfers and related messages, and that the information remains with the wire transfer or related message throughout the payment chain
- Where this information is missing, authorities need to take appropriate action:
- Countries should ensure that financial institutions monitor wire transfers for the purpose of detecting those which lack required originator and/or beneficiary information, and take appropriate measures
- This is important because such transfers could be used for money laundering, terrorist financing or other illegal purposes:
- Countries should ensure that, in the context of processing wire transfers, financial institutions take freezing action and should prohibit conducting transactions with designated persons and entities, as per the obligations set out in the relevant United Nations Security Council resolutions, such as resolution 1267 (1999) and its successor resolutions, and resolution 1373(2001), relating to the prevention and suppression of terrorism and terrorist financing
5. Hmm – So what are the important bits from Regulation (EU) 2015/847?
…..Regulation (EU) 2015/847 – Article 4 *IMPORTANT*
- Payer (person holding the account from which the payment will be made) information:
- Name of the Payer
- Payers payment account number
- Payers address OR Official personal document number OR Customer Identification Number OR Date and place of birth
- Payee (intended recipient of the funds) Information:
- Name of the payee
- Payees account number
6. …..Regulation (EU) 2015/847 – Article 5
Article 5
- For Payments WITHIN the EU, payments service providers (banks) must:
- Ensure that they enforce (1.) and (2.)
- Assign a unique transaction identifier to each transfer of funds
- Enforce points (1.) and (2.) for all transfers above EUR 1000
- Payments less than EUR 1000 must carry at least the names and account numbers of the payer and payee
7. …..Regulation (EU) 2015/847 – Article 6
- For Payments OUTSIDE of the EU, payments service providers must:
- I got bamboozled by this one, bottom line is you need to ensure you adhere to Article 4
- Paymens less than EU 1000 must include at the very least the names and account number of the payer and payee
8. …..Regulation (EU) 2015/847 – Article 8
If the payment service provider is aware that information referred to in Article 4 is missing, the payment service provider should reject the transfer or request the additional information from the payer (You!!)
9. …..Regulation (EU) 2015/847 – Article 27
This Regulation comes into force from 26th June, 2017
10. Eh? Summary Please!
Bascially, from a corporates perspective this means (as far as i can tell) that any wire transfers must indicate the following before 26th June, 2017:
- Payer (person holding the account from which the payment will be made) information:
- Name of the Payer
- Payers payment account number
- Payers address OR Official personal document number OR Customer Identification Number OR Date and place of birth
- Payee (intended recipient of the funds) Information:
- Name of the payee
- Payees account number
If the above information is missing, the bank can reject the payment or ask you for further information in order to complete the payment.
Like i said at the beginning, I´m just learning this stuff so if you have spotted a mistake please let me know. Muchos gracios!