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Improving Payments Transparency with Wolfsberg Group Standards 

The Wolfsberg Group’s revised Standards for payments transparency explained.

Georgia Walker
November 9, 2023

With a 42% increase in global cashless payments, payments providers are going nowhere. The global focus is now on creating uniformity and transparency in the payments space to enable frictionless financial crime compliance.  

Innovation in the payments space has boomed, from open banking to instant payments with a focus on customer experience and adaptability that is driven by changing consumer behaviour. This has pushed the financial system to be more competitive, inclusive and efficient but it has opened new avenues of financial crime exploitation in the space causing confusion on transparency in complex situations for all payments stakeholders.  

By 2030, PwC have projected a more than 50% growth in cashless transaction volumes, so financial institutions (FIs) need to prepare now to standardise their approach.  

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Enter the Wolfsberg revised Standards, which works to create global uniformity and clarity in the payments space.  

The Wolfsberg Group is an association of 12 global banks which aims to develop frameworks and guidance for the management of financial crime risks.

These Standards apply to:  

  • Cross-border payments  
  • Domestic payments, as applicable under local regulations, including domestic Payment Market Infrastructures (PMIs)
  • All fiat currencies, including digital representations of fiat currencies such as Central Bank Digital Currencies (CBDCs)
  • Payments regardless of value, including transactions carried out using a credit, debit or prepaid card where the underlying intent of the transaction is to affect a person-to-person transfer of funds
  • Debtor, intermediary, and creditor agent Payment Service Providers (PSPs)

Key updates for payments firms:

1. Inclusive terminology for clearer roles:

Using broader terminology to include new entrants to the space, referring to FIs as "payment service providers" (PSPs) to encompass both traditional banks and newer market entrants to enable clear role establishment for PMI engagement. This means that payments firms will now have a clearer role in the payment flows and will be able to actively understand their responsibilities when information sharing with other PSPs to improve their financial crime compliance. Creating clear accountability is key when carrying out data capture, sharing and monitoring between multiple PSP entities is a great move towards more seamless compliance activities and creates clear accountability.  

This will establish specific financial crime compliance and payment transparency roles and responsibilities of all participants associated with the PMI and this should include non-registered PSPs to leverage relation shows with PMI participants to settle payments.  

The revised Wolfsberg Standards works to clarifying the roles and limitations of intermediary and beneficiary FIs in identifying suspicious activity and have provided payment flow diagrams that explain payment roles to help break this down for PSPs.

2. Smoother data sharing with ISO 20022 alignment:  

PSPs should focus on moving to align with ISO 20022, ensuring consistency across payment processes for a more uniform approach across the payments space.  

If payment data should be readily understandable by parties in the payment chain, in accordance with applicable laws and regulations, the PMI’s rulebook, and the associated message format, it becomes much easier to monitor and screen all parties effectively, even in circumstances of high payment intermediation, and achieve financial crime compliance.  

3. Payment transparency:  

Focusing on enhancing payment transparency will be key for PIs, contingent on the widespread adoption of ISO 20022 standards. This includes responsibility for maintaining adequate records that permit the reconstruction of messages as required by local regulations, and implementing reasonable controls to manage the payments process to be accessible to all PSPs in the PMI.

Products that facilitate faster cross-border payments should select the domestic PMI(s) that maximises the transparency of the cross-border nature of the payment. This way information about the payment transmitted to the next PSP in the payment chain can be readily understood by all intermediary and/or creditor agent PSPs.  

Faster cross-border payments are great for customers but present challenges to the PSPs that facilitate them, especially when domestic stakeholders hold different processing standards or regulations. PSPs should be actively working to include cross border payments to improve their approach to financial crime compliance within the region as well as globally.  

4. Inclusivity to all stakeholders:  

PSPs should ensure they are being inclusive of all stakeholders, which includes expanding the list of stakeholders to include PMIs and their competent authorities for harmonisation. This ensures compliance with its own local laws and regulations, including (if applicable) the rulebook for the PMI through which the intermediary agent PSP intends to facilitate settlement of the payment.  

Transparency with domestic stakeholders when carrying out payments that are cross-border, for example, could include local PSPs (creditors or debtors) in that market that are part of the payment flow. Greater transparency between the both the domestic and non-domestic PSP on data capture and sharing will allow their approach to financial crime compliance to be seamless between the stakeholders.  

5. Reaffirming core principles:  

The Standards work to reaffirm that a payment is a payment, emphasising the ordering of PSP's responsibility for proper fund transfer identification and use of the legal and regulatory guidance.

Where permitted by the PMI and when available, use the Legal Entity Identifier (LEI) or Bank Identifier Code (BIC) or equivalent reference codes to enhance the accuracy of identification information on relevant parties. This additionally supports determining what types of payments are permitted to be cleared via the PMI and the corresponding formatting guidance/requirements.  

Addressing challenges of the Standards

The Wolfsberg Group address the challenges around payment transparency as the space moves away from traditional banking to including any payment service providers, but this inclusion to redistribute accountability will take time. They maintain that the principle responsibility for ensuring payment transparency starts with the debtor agent PSP, with basic data on debtor and creditor parties (and intermediaries when applicable) being key to providing useful information that enables transparency between all PSPs.  

Despite the work by The Wolfsberg Group to make financial crime compliance in payments more transparent, Standards can be difficult to enforce and difficult to adapt in different regions due to different regulatory and local approaches to financial crime compliance. Instead, PSPs should all be working to:

  • Improve their own data capture and make sure they are correctly labelling information  
  • Improve their relationships with other PSPs and stakeholders in the PMI for easier information sharing as part of the payments flow  
  • Start preparing for ISO 20022 transition as the PMI moves towards adoption for clearer roles and lines of accountability in the future  

Transparency is key to improving our collective approach to financial crime compliance, with clear accountability between stakeholders the responsibilities of their role are easier to enact. By unifying the approach to financial crime compliance in payments PSPs will come one step closer to creating a more seamless approach to compliance in payments to stop criminals in their track as information sharing makes it easier to spot them.  

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