According to the World Migration Report, 87 million migrants are identified as living in Europe, revealing that the continent currently holds around 30 percent of the global migrant stock. With this in mind, it’s no surprise that the European continent has one of the highest levels of remittance payments. Furthermore, after accounting for a recent drop due to the global pandemic, the World Bank recorded a 5.3 percent increase in remittance money flows in 2021 (bringing the total transacted to $67 billion), with a further 3.8 percent growth anticipated in 2022.
If you are planning to transfer money abroad, you must be aware of the various rules and regulations that you must comply with if you want your transfer to go through unhinged, especially if you are a business owner/payment services provider. One of the most recent and important legislative updates in this area is the EU Funds Transfer Regulation, applied in member states since 26 June 2017.
What is the EU Funds Transfer Regulation?
The EU Funds Transfer Regulation (also known as the Wire Transfer Regulation) necessitates specific payer and payee information to accompany any transfer of funds. In this context, a ‘transfer of funds’ includes any transfer of funds that is done electronically, such as a bank transfer, email, or fax, for example.
The regulation is intended to assist in the detection, prevention, and prosecution of money laundering, terrorist financing, and financial sanctions violations so that the EU framework complies with the International Anti-Money Laundering (AML), Financial Action Task Force’s (FATF), and Counter-Terrorist Financing (CTF) standards.
The EU Funds Transfer Regulation details what information you must provide when initiating an international funds transfer in regard to the following:
- Payer (the person or business sending the funds)
- Payee (the person or business receiving the funds)
What information is required?
When sending or receiving funds in the EU (especially cross-border), the regulations require you to obtain ‘complete information’ about the payer and payee. This is the case for all transfers in all currencies. Here is a breakdown of the specific information that must be provided:
Payer information
The complete information regarding the sender must include their:
- Full name
- Full address
- Bank account number, reference, or unique identification number that will allow the transfer to be traced back to them
If you do not have access to the payer’s full address, then you can provide the following instead:
- Date and place of birth
- National identity number (such as a passport)
Payee information
The complete information regarding the receiver must include:
- Full name
- Bank account number, reference, or unique identification number that will allow the transfer to be traced back to them
Information for payment service providers
You will be classified as a ‘payment service provider’ if you own a company that transfers funds within the EU. To remain compliant, you may be required to verify the ‘complete information in this case. This additional verification is usually required if the transfer value exceeds €1,000 or if any portion of the transfer is funded by cash or money from an anonymous source.
Furthermore, if there seem to be multiple transactions of less than €1,000 that appear to be linked, you must determine how much the linked transactions total. If they total €1,000 or more, you must verify the payer’s or payee’s complete information.
Finally, if you regularly transact with the same payer and develop a business relationship, you must obtain complete information. Once you’ve verified the payer’s complete information, you will not go through it again for every transaction. Instead, you’ll need to check it at regular intervals. It is up to you how frequently you do this, as your risk assessment determines it.
Rejecting a transfer as a payments service provider
If you are a payment services provider, there may be situations that will require you to reject the transfer and deny service to the payer. The most obvious reason to reject a transfer is that the payer fails to provide complete information when requested. It’s important to note that many of the guidelines stated in the legislation are open to interpretation, so it’s important that you consider the risk assessment of each transfer on a case-by-case basis as failure to comply with these regulations can result in heavy sanctions and penalties.
What are the penalties for non-compliance?
The penalties for non-compliance depend on the seriousness of the case in question and the country in which you reside. In general, you are likely to face the consequences for failing to carry out adequate:
- Customer due diligence
- Risk assessment
- Policies, controls, and procedures
- Record keeping
In the EU, the maximum sentence should mean five years (or more, depending on the county). On top of this, anybody who is found guilty will be burned from running for public office or holding a position as a public servant. Individuals will also be banned from signing contracts with public authorities, and they may have their property and other assets confiscated.
