Proposed EU Funds Transfer Regulation – Overview and Summary of Requirements

• By: Staff Editor
• Date: March 01, 2013

• The regulation applies to transfers of funds /all transactions of payment service provider established in the EU
• It does not apply to transactions carried out using any digital or information technology (IT) device or through credit and debit cards. It does apply if any of the former methods are used in person-to-person transfers
• The regulation does not apply to transactions in which:
  • the transfer of funds entails the payer withdrawing cash from individual accounts,
  • funds are transferred to public authorities (in the form of taxes, fines or other levies) and
  • in which both the payer and the payee are payment service providers

• The payment service provider of the payer should ensure that the transfer of funds is accompanied by the following information on the payer:
  • name of the payer
  • payer's account number / a unique transaction identifier - used to carry out transactions
  • payer’s address, or national identity number, or customer identification number or date and place of birth
• The payment service provider of the payer should ensure that transfers of funds are accompanied by the following information on the payee:
  • name of the payee; and
  • payee's account number/ unique transaction identifier
• The payment service provider of the payer should verify the accuracy of the information provided above (based on documents and data obtained from other sources) before carrying out any transactions.
• Payer’s identity has to be verified and retained - in connection with the opening of the account - according to the requirements of Directive. This is applicable only to transactions from payers account / transactions which exceed EUR 1000.

• related to transfer of funds, batch file transfers / transactions exceeding or less than EUR 1 000  (in case payment service provider of the payer is either established in or outside the EU)
• related to identity of the payee (in case of transactions amounting to more than EUR 1000 or  if suspicious or not verified previously), other relevant information on the payer and payee

• The payment service provider of the payee should:
  • establish effective risk-based procedures so as to execute / reject / suspend transactions with incomplete or missing information and to initiate appropriate follow-up action.
  • either reject the transfer or ask for complete information (on the payer and the payee), if he finds that information provided is missing /incomplete.
• In cases, where a payment service provider constantly fails to supply the necessary information on the payer, the payment service provider of the payee should:
  • take initial steps like issuing of warnings / setting of deadlines before totally rejecting fund transfer from that payment service provider or
  • deciding whether or not to restrict or terminate its banking relationship with that payment service provider.
• The payment service provider of the payee should report such issues (at the earliest) to the competent authorities responsible for combating money laundering or terrorist financing.

• The intermediary payment service provider of the payee should:
  • establish effective risk-based procedures so as to deal with execution / rejection/ suspension of transactions (with incomplete or missing information) and to initiate appropriate follow up action – if necessary.
  • either reject the transfer or demand for complete information on the payer and the payee, if he finds that information provided is missing /incomplete.
• In cases, where a payment service provider constantly fails to supply the necessary information on the payer, the intermediary payment service provider of the payee should:
  • take initial steps like issuing of warnings / setting of deadlines before totally rejecting fund transfer from that payment service provider or
  • deciding whether or not to restrict or terminate its banking relationship with that payment service provider.
• The intermediary payment service provider of the payee should report such issues (at the earliest) to the competent authorities responsible for combating money laundering or terrorist financing.

• Technical limitations will be considered if the payment service provider of the payer is established outside the EU and the intermediary payment service provider is a part of/ belongs to the EU.
• An intermediary payment service provider can use a payment system with technical limitations that prevents information on the payer accompanying transfer of funds if it is unaware that the information required is missing or incomplete.
• If an intermediary payment service provider becomes aware that the information required along with funds transfer is incomplete when receiving funds, it may only use a payment system with technical limitations if it is able to inform the payment system provider of the payee.
• When an intermediary payment service provider uses a payment system with technical limitations, the intermediary payment service provider should - upon request from the payment service provider of the payee, provide all available information (on the payer) within three working days of receiving that request.

• The payment service provider of the payer and the payment service provider of the payee should retain records /other documents related to information (transfer of funds, detection of missing / incomplete information) at least for a period of five years.
• All practicable measures should be taken to ensure that every record (of personal data) is destroyed soon after the expiry of the period - unless the law requires a longer retention period. However, retention period for records related to transfer of funds should not exceed ten years.

Additional Resources

Read the full Proposed European Commission Anti-Money Laundering Regulation - Fund Transfer Information here.