[Newsflash n. 27]

 

On 5 April 2017 the Joint Committee of the three European Supervisory Authorities (EBA, EIOPA and ESMA – “ESAs”) launched a public consultation on the Draft Joint Guidelines (“Draft Guidelines”) under Article 25 of Regulation (EU) 2015/847 (”Regulation”) on the measures payment service providers should take to detect missing or incomplete information on the payer or the payee, and to manage a transfer of funds in the absence of the required information.

With the aim to align the EU Legislation with the Financial Action Task Force (FATF) with its Recommendation n. 16 (setting an international anti-money laundering standard, adopted in 2012), the Regulation, which will be applicable from 26 June 2017, addresses both:

  • the Payment Services Providers (“PSPs”), by imposing them several disclosure requirements with a view to prevent the abuse of funds transfers for terrorist financing and other financial crime purposes, and
  • the Competent Authorities (“CAs”) responsible for supervising PSPs, by enabling them to trace such transfers, where this is necessary to prevent, detect or investigate Money Laundering or Terrorist Financing.

In particular, with regards to the PSPs, the Regulation requires some information on both the payer and the payee to be included in wire transfers messages for certain transfers of funds (in any currency), where at least one of the PSPs in the payment chain is established in the European Union. Moreover, the regulation imposes them to put in place adequate procedures to detect and block the execution of transactions that lack the required information.

Article 25 of the Regulation requires the ESAs to issue guidelines on the measures PSPs should take to comply with the new obligations. In this respect, the Draft Guidelines are aimed at better defining:

  • Which transfers of funds are within the scope of the Regulation and which are, instead, covered by the exemptions of its Article 2(3);
  • The criteria to assess, for each single transaction, the role played in the payment chain by PSPs and, consequently, which obligations are imposed on them;
  • The procedures that PSPs need to implement in order to detect transfers of funds that lack the required information;
  • The risk factors PSPs should consider when determining whether to execute, reject or suspend a transfer of funds which lacks required information on the payer or the payee, including when assessing whether the lack of information gives rise to suspicion of Monetary Laundering and Terrorism Financing; and
  • How CAs should assess whether the procedures PSPs have put in place to comply with the Regulation are adequate and effective.

The Draft Guidelines provide an overview of many specific scenarios that that PSPs should be prepared to face. As an example, the document takes into account the so-called “Linked transactions”, i.e. transactions that, even if in principle covered by an exemption – e.g. being of a value lower than EUR 1000 each – are sent (i) from the same payer to the same payee and (ii) within a short time-frame, so that they appear to constitute parts of a single payment. The ESAs require PSPs to put in place effective procedures to detect and prevent such unlawful conducts.

With this consultation, the ESAs aim at (a) building a stronger understanding of the procedures needed to detect and manage such transfer of funds that can potentially expose the European Union’s financial markets to the risk of Monetary Laundering and Terrorism Financing, and (b) promoting a more intense cooperation between PSPs and CAs on these topics.

The subjects at stake are crucial for the European Authorities as proven by the circumstance that this is the second consultation process launched this year by the ESAs on Money Laundering and Terrorism Financing. The purpose of the first one, started on 10 February 2017 and open until 5 May 2017, is to seek the market player’s views on the “Draft regulatory technical standards (RTS) to help Member States determine when payment service providers and electronic money issuers should appoint a Central Contact Point (CCP) to support the fight against money laundering and terrorist financing” (see the relevant post on our website).

Stakeholders are required to submit their responses, via the online form, by 5 June 2017.

We would be happy to offer you any required assistance in submitting your response or any further clarification on the Draft Guidelines or any other Payment Services related matter.

 

Contacts:

Vito Vittore
Senior Partner

Marina Mirabella
Senior Partner

Massimiliano Silvetti
Senior Partner

Elena Pagnoni
Of counsel

Luigi Bonifacio
Associate

Chiara Calzecchi Onesti
Associate