The FCA has reminded UK payment service providers to prepare for changes to the law which will affect how they make cross-border payments. PSPs have not yet had to comply with Brexit-related changes to the UK’s Funds Transfer Regulation but will need to be ready to do so from 31 March 2022.
Funds Transfer Regulation
The EU’s Funds Transfer Regulation (also known as the Wire Transfer Regulation) requires certain information on the payer and payee to accompany electronic payments. Sometimes known as the “travel rule”, its purpose is to help identify and combat money laundering, terrorist financing and breaches of financial sanctions. Under the FTR, transfers of funds outside the EEA must carry more information than transfers within the EEA.
FCA standstill relief
The FTR was among EU legislation which was retained in UK law at the end of the Brexit transition period and adapted to fit a UK-only context. For example, the scope of the UK FTR was reduced so that it requires additional information for transfers outside the UK and Gibraltar. However, UK PSPs have not yet had to apply this change to UK law because the FCA used its temporary transition powers to give firms time to adapt to the new UK regime.
This “standstill relief” means that, under the UK FTR, UK PSPs may continue to attach only simplified information to transfers from the UK into the EEA, such as the payment account number(s) or a unique transaction identifier.
What happens next?
Standstill relief ends on 31 March 2022. From this date, UK PSPs will need to ensure transfers from the UK to the EEA exceeding EUR 1,000 are accompanied by the following information:
- the name of the payer and payee,
- the payer’s and payee’s payment account number, and
- the payer’s address, official personal document number, customer identification number or date and place of birth.
Where the funds being transferred do not exceed EUR 1,000 only the names and account numbers or a unique transaction identifier are necessary.
If all the PSPs in the payments chain are established in the UK or Gibraltar, the information requirement is to provide the payment account numbers of the payer and payee, or their unique transaction identifiers. However, if the PSP of the payee requests information from the PSP of the payer, within three working days the PSP of the payer must provide the PSP of the payee the full set of information as if the transfer had been made outside the UK/Gibraltar. EEA PSPs may already have started asking UK PSPs for this information under the EU FTR.
Both the EU and UK versions of the FTR require PSPs to have effective risk-based procedures in place for receiving transfers of funds that are missing information. The FCA’s latest reminder notes that, where payments are disrupted, it expects firms to communicate promptly with any affected customers, to make them aware of the disruption and give them the opportunity to make the payment in another way.