Finance Denmark (FD) welcomes the opportunity presented by the EBA to comment on the Consultation of the Guidelines.
FD agrees with the general considerations, including the necessity of ensuring an effective, risk-based and proportionate approach to complying with Regulation (EU) 2015/847. This has to be achieved in way that also supports the best possible consumer experience, the free movement of capital and the continued growing demand for faster payments.
It is important to note, that recital 7 of Regulation (EU) 2015/847 states, that “the regulation is not intended to impose unnecessary burdens and costs on payment services providers or on persons who use their services”.
While we agree with the general considerations, the system enhancements needed in order to fully comply will both be resource demanding, and of significant cost for the Danish banking sector, which can affect the consumer experience. This should be viewed in the light that the specific requirements and guidelines have been published at a very late stage before the implementation of Regulation (EU) 2015/847. However, we understand that there could be an implicit “period of grace” from the moment of publication until the banks/PSPs have had a reasonable period to adjust systems and implement updated procedures.
Finally, FD sees the need for some clarifications under this chapter.
Chapter I, paragraph 13, regarding linked transactions refers to transactions ‘from the same payments account or the same payer to the same payee’. In our opinion, it is not quite clear how the wording ‘same payee’ should be understood in this context. A payee can have multiple accounts with the same PSP. Is it only a linked transaction if it is sent to the same specific account of the payee, or does it also cover transactions to any of the payees accounts with the same PSP? We would welcome a clarification.
Paragraph 13 also refers to ‘within a short time-frame, for example within six months‘. We would suggest clarifying if the time-frame is to be viewed as fixed period or on a rolling basis.
FD agrees that the expectations on intermediary PSPs and PSPs of the payee in Chapter II in general are proportionate and necessary to both comply with Regulation (EU) 2015/847 and ensure a level playing field.
Already today, both SWIFT and SEPA payment systems to a large degree operate with fixed and well- structured syntaxes to help ensuring a high degree of compliance with the requirements on full information and the detection of inadmissible characters or input.
Nevertheless, not all payment instructions appear completely structured which makes a fully systematic control difficult to achieve immediately after the implementation of Regulation (EU) 2015/847. However, SWIFT has already taken the necessary measures to address this in connection with their FIN Standard Release 2020. The most significant changes will be to remove free-format message field options 50 and 59 from the MT103 and related messages to ensure that payer and payee data are systemically captured and exchanged in a structured format.
This supports the purpose of Regulation (EU) 2015/847 and recital 4 stating, that developments at international level should be taken into account to foster a coherent approach in the international context and to increase the effectiveness of the fight against ML/TF.
Whilst FD fully supports initiatives to detect missing and “obviously meaningless information” we see major challenges in implementing structured verification. As an example, a Nordic telco company is called “3”, and a Danish engineering company specializing in noise reduction is called “Minus 10db”. Such company names would most likely be flagged in any automated control of obviously meaningless information when appearing in payment instructions as payer or payee.
However, in order to ensure a level playing field across banks and jurisdictions, it would be helpful with a definition of “obviously meaningless information” provided by the EBA.
In order to ensure detection and management of PSPs that are repeatedly failing to provide the required information, FD will take initiative to develop and implement a guideline for the practical monitoring, sanctioning and notifying authorities of such shortcomings. This will be done in close dialogue with the Danish FSA.
Finally Chapter II, paragraph 51-53, addresses notifying authorities about repeated failings. However, the requirements are only directed at PSPs. In order for this to be effective, the competent authorities also need to have systems and procedures in place to handle the notifications. In our opinion the guidelines should address this.
FD agrees with the provisions for intermediary PSPs as described in chapter III.
In general, FD agrees with the provisions for PSPs of the payee (beneficiary) in Chapter IV.
However, further clarification is needed in order to determine if a verification of the accuracy of information on the payee must in fact be performed. This issue has also been raised through the German industry association “Die Deutsche Kreditwirtschaft” and agreement was reached with BaFin, the German FSA, that
• for all intra-EEA payments a name-number check is not required
• a name-number check is (might be) required for payments exceeding EUR 1,000 where the originating PSP is established outside the EEA. However, FD would welcome an absolute clarification whether a verification of the accuracy of information on the payee is indeed needed or not.
Pursuant to Article 7 (5) of Regulation (EU) 2015/847 it is our understanding that a verification is not required if the identity of the beneficiary has been verified according to Article 13 of Directive (EU) 2015/849 and the information obtained pursuant to that verification has been stored in accordance with article 40 of that Directive.
However, it is unclear based on which information in a payment message, a beneficiary PSP shall determine whether the preconditions are met for Article 7 (5) to apply
• either based on the transmitted account number or based on the transmitted name of the beneficiary,
• and in case of discrepancy which information should prevail.
These clarifications regarding Regulation (EU) 2015/847 are essential for the understanding and ability to comply with the guidelines, and to ensure a coherent and effective approach to fighting ML/TF.