SWIFT Standards MT Release 2020 prepares the community for a more systematic approach to compliance. But there’s a lot to do to prepare so organisations should act now to meet the challenging timetable.
Payment data quality is a big concern throughout the financial services industry. Financial institutions must know who they are engaging with and ensure that all transactions comply with a growing body of regulations. Banks are the first line of defence against money laundering and the financing of terrorism. The Financial Action Task Force’s (FATF) recommendation 16 requires full name and address details to be specified for ordering customer (payer) and beneficiary (payee) for all wire transfers. Legislation in major jurisdictions further requires this data to be screened against published lists of sanctioned entities.
FATF 16 - A serious business issue with real consequences
Penalties for breaches of sanctions rules include unlimited fines for companies and could mean prison for some individuals. With such high stakes, now is the time to adopt a best practice approach to payment data management.
The SWIFT community is keen to implement a more structured approach to payment data. The Standards MT Release 2020 will remove free-format message field options for fields 50 and 59 from the MT103 and related messages to ensure that payer and beneficiary data is systematically captured and exchanged in a structured format. In the longer term this structured approach will simplify compliance and boost confidence. But in the short term much work is required to prepare for the change.
Invest now to reduce future compliance costs
Many financial institutions currently make heavy use of free format fields to exchange payer and beneficiary data. Although convenient, this can lead to incomplete data and make it difficult for data to be reliably screened. In anticipation of the new structured formats, all institutions must ensure that payment data is complete, accurate and up to date. For some institutions this will require significant data remediation work. Many system interfaces will also have to be adapted to capture the necessary information.
Doing nothing is not an option
2020 may seem a long way off but in reality this is a challenging timetable. Many systems and business processes must be adapted to capture, store and make data available in the required format. By acting now, these changes can be scheduled into regular systems upgrades to minimise disruption and control costs.
Implementing a structured approach to the management of party data is a significant project that requires coordination across many business and technical functions. But, institutions that invest now will be well rewarded with easier compliance, fewer errors and lower data remediation costs.
The SWIFT community decided in 2015 to give itself 5 years to improve the quality of payments party data in MT messages, to streamline screening and other compliance processing. As we approach the half-way point, banks that have not started their journey will need to act soon to avoid missing the deadline.
How SWIFT can help
The removal of free-format party fields in payment messages is a community decision, and the result of extensive consultation with our members. We appreciate this change imposes an additional workload and are keen to help.
SWIFT conducts syntax checks on payments flowing through our network. These check whether the format specifications are properly respected but not whether the quality of the data is appropriate. As a result, a combination of multiple repetitive characters such as ‘xxxxx’ may pass the check but provide little transparency on the name of the payer.
SWIFT also offers optional tools and services to assess data quality for messages both sent and received, looking at the presence and likely relevance of the data in the party fields, which can be invaluable to help users pinpoint and rectify the source of poor data. We will be delighted to help you assess your data quality and advise how best to implement a holistic solution that delivers sustainable benefits.
For more details on the free format deletion for party fields in MT Payments messages in SR 2020, please see the Standards Information Paper.