Essential Guide To Making Payments In U.S. Dollars And Euros - Wells Fargo

The CBPR US Observer Group in collaboration with theFed and TCH have decided to utilize Fedwire tag {8200}and CHIPS tag [900] to provide a copy of the received ISO20022 message to the next bank in the chain. By November2022, both tags will provide up to 9,000 characters tosupport a copy of the ISO 20022 message, which willbe sufficient to support the vast majority of paymentscenarios. In cases where the ISO 20022 message exceeds9,000 characters US Banks can make a risk-based decisionto return the payment order to the previous instructingagent.businesses and casinos that are required to keep a recordunder these Regulations in respect of an electronic fundstransfer.Transaction Management Platform (a) the beneficiary’s name and address; and**The Transaction Management Platform mediates betweeninstitutions using different communication channels andformats, ensuring interoperability amongst all membersof the community. Institutions can continue to use the MTformat with the platform until the ISO 20022 migrationdeadline for cross-border payments and reporting inNovember 2025, and can adopt new services (such as thoseprovided through APIs) at their own pace.* (b) if applicable, the account number or other referencenumber, if any, of the beneficiary.Regulatory informationCanada - Proceeds of Crime (Money Laundering) andTerrorist Financing Act (PCMLTFA).The Financial Transactions and Reports Analysis Centreof Canada (FINTRAC) amended the Regulations to theProceeds of Crime (Money Laundering) and TerroristFinancing Act. The Regulations govern anti-moneylaundering (AML) rules in Canada. The regulation, effectiveJune 1, 2021, requires under section 9.5 the following:Electronic Funds Transfers124 (1) For the purposes of section 9.5 of the Act, theprescribed persons or entities are the financial entities,money services businesses, foreign money services(2) For the purposes of section 9.5 of the Act, theprescribed electronic funds transfers are internationalelectronic funds transfers, as well as other electronic fundstransfers within the meaning of subsection 1(2) that areSWIFT MT-103 messages or their equivalent.(3) For the purposes of paragraph 9.5(a) of the Act, theprescribed information 2-eng?s 1Additional Market Practices and RegulatoryRequirementsWolsberg Group- Global Banks: Global StandardsThe Wolfsberg Group is an association of thirteen globalbanks which aims to develop frameworks and guidance forthe management of financial crime risks, particularly withrespect to Know Your Customer, Anti-Money Laundering andCounter Terrorist Financing policies. Materials published by theWolfsberg Group are designed to provide financial institutions(FIs) with an industry perspective on effective financial crimerisk management. The Wolfsberg Group does not advocatethat FIs simply adopt each publication, but rather each FIshould consider the risks described, the applicable regulatorystandards and their own defined risk management strategy.*SWIFT Platform Evolution Connectivity Guidance, March 2021**It should be noted that some Financial Institutions in Canada have interpreted the name and address to include the street number and street name of thebeneficiary and originator. The requirement pertains to financial institutions in the Originating Bank role and not the Intermediary Bank role.7

Wolfsberg Group Payment Transparency Standards 2017include the following information on the beneficiary party: Address information should be provided to the fullestextent possible. Country should receive priority, followedby City, State/Province/Municipality, Street Name,Building Number or Building Name and Postal Code inaccordance with the resident country 2017.pdfREGULATION (EU) 2015/847 OF THE EUROPEANPARLIAMENT AND OF THE COUNCILThe European Union’s Wire Transfer Regulation –EU2015/847 repealed and replaced the previous EUregulation EU Regulation 1781/2006 on Anti MoneyLaundering. The regulation enhances the rules governingfunds transfers effective June 26th, 2017 for anytransactions sent or received via the Union.The regulation also referred to as the Wire TransferRegulation, implements the recommendation of FinancialAction Task Force (FATF16), aims to make the abuse offunds transfers for terrorist financing and other financialcrime purposes more difficult and enables relevantauthorities to fully trace such transfers where necessary toprevent, detect or investigate money laundering or terroristfinancing.The following information is mandatory for all banks withinthe EU: Full Name of the PayerFull name refers to a company’s registered name, possiblysupplemented by its legal form and; for an individual to thelast name and first name; Full address of the PayerThe address of the payer is required for all transactions (ifthis is not available then official personal document numberor customer identification number or date and place ofbirth)With respect to the payee (beneficiary) the following aremandatory and correspond to Field 59 Full Name of the PayeeFull name refers to a company’s registered name, possiblysupplemented by its legal form and; for an individual to thelast name and first name Account Number of the PayeeWhere available the preferred account number format is theIBAN. Payee Address – this is not mandatory according to theEU regulation, however, Wells Fargo recommends theinclusion of this information on all wire transfers. Pleasenote that if this is unavailable it will not result in a rejectionof the wire N/TXT/PDF/?uri CELEX:32015R0847&from ET Account Number of the PayerWhere available the preferred account number format is theIBAN8

Message impactThe approach of the CBPR group is a two-year period to creating usage guidelines.The 2019 focus is on the high-volume payment messages and reports shown in thebelow chart. The second year’s scope has yet to be announced.Message NameMessage NumberEquivalent MT MessageBusiness Application Headerhead.001No equivalentCustomer Credit Transfer Initiationpain.001MT101FI to FI Customer Credit Transferpacs.008MT103Financial Institution Credit Transferpacs.009MT200/MT205/MT202*/MT202 COV*/MT205 COVFI to FI Payment Cancellation Requestcamt.056MT192/MT292Payment Returnpacs.004MT103 (Return)8/MT202(Return)*FI to FI Payment Status Reportpacs.002MT199/MT299 (negative)*Bank to Customer Statementcamt.053MT950/MT940Bank to Customer Account Reportcamt.052MT942Bank to Customer Debit Credit Notificationcamt.054MT900/MT910*Notification to Receivecamt.057MT210*New Check MessagesTBDMT110/MT111/MT112New Fee MessagesTBDMTn90/n919

European regulationsPayment Service Directive II and Open BankingThe second Payment Services Directive (PSD2) was issuedby the European Commission in 2015 and took effect inJanuary 2018. This regulation followed from PSD1, whichsought to level protections and offer transparency inpayment fee practices for consumers across the EuropeanEconomic Area (EEA). The second directive, similar toDodd-Frank in the U.S., seeks to protect consumers andensure that products sold to consumers are appropriatelypriced, thereby reducing the fees taken on qualifyingtransactions. PSD2 basically eliminates “BEN” as a chargecode for intra-EEA flows across all currencies.PSD2 widened the scope of PSD1 by:Introducing new payment transaction definitions andchanging the deductions applicable on a transaction basedon origin and destination: Non-EEA currency payments executed on an intra-EEAbasis (e.g., USD or JPY), where the charge code “BEN” isno longer applicable within the EEA One Leg Out (OLO) transactions in any currency, i.e., oneof the Payment Service Providers (PSPs) are located inthe EEA and the other is located outside of the EEAallow channels, or Application Program Interfaces (APIs),that could be used by TPPs to provide financial servicesusing the functionality and information supplied by theconsumers’ banks. This portion of the regulation is oftenreferred to as “open banking.”In order to satisfy the requirements of PSD2, banks withinthe European Union must provide APIs to enable accessto their applications that maintain account informationand payment initiation functions to consumers. APIs areprotocols that transfer data automatically from acrossapplications. They can be viewed as similar to electricalsockets that allow for programs to “plug in” to applications.TPPs can then access client accounts via the APIs to thebanks’ applications (with the consumer’s consent) toprovide financial products and services to both consumersand merchants.August 2019 was the earliest that EU member stateswere expected to have implemented Regulatory TechnicalStandards in compliance with PSD2. Wells Fargo’s Londonbranch has begun to satisfy the technical requirementsof the regulation, including the creation of an API testingfacility, which was made available for TPPs in March 2019.Full implementation of PISP is expected to be complete byQ1 2020.Broadened market access: New regulated Payment Service Providers with access toclient account information and that facilitate transactioninitiation or aggregation are known as Third-PartyProviders (TPPs) and further distinguished as PaymentInitiation Service Providers (PISPs) and AccountInformation Service Providers (AISPs). Access to payment systems and accounts for TPPs on aproportionate, objective, and non-discriminatory (POND)basis.To emphasize access and competition across the bankingsector, the regulation included requirements that banks10

High-level paymentsoverview — understandingthe USD and EUR paymentsystemsUSDThe USD payment network within the U.S. consists of fourprimary payment vehicles: CHIPS (Clearing House Interbank Payment System) Fedwire ACH (Automated Clearing House) ChecksThe following section gives a brief description of each ofthese payment methods:CHIPSCHIPS was established in 1970 by the New York ClearingHouse Association (now The Clearing House) and operatesa real- time, private sector payment system owned bybanks. CHIPS maximizes processing efficiencies, minimizesrisk, and allows participant banks to respond effectively tothe ever-changing nature of domestic and international(cross-border) payments.CHIPS is a real-time net settlement (RTNS) system thatuses a patented multilateral netting process to settlepayments with minimal use of liquidity. The systemcontinually scans its payment database looking foroffsetting payments between two or more banks. Thisprocess ensures that payments are made efficientlyand rapidly. Payments are considered final and settledwhen released by CHIPS. Neither daylight nor overnightoverdrafts are allowed, eliminating any financial risk toCHIPS or its participants.Each CHIPS participant (42) is assigned a four-digit CHIPSParticipant Number (often referred to as the CHIPS ABAnumber), which serves as a bank identifier within CHIPSand in SWIFT messages. In addition, CHIPS participantshave the ability to assign a unique Universal IdentificationNumber (UID) for accounts on their books. This six-digitUID is a valuable tool in promoting straight-throughprocessing (STP), since it can be used to uniquely identifybank and corporate customers without the need to providesensitive account information. Wells Fargo is the 6th largestuser of CHIPS.FedwireFedwire is the electronic, large-value payment systemmanaged by the Federal Reserve Bank of the United States.Fedwire is a real-time gross settlement (RTGS) system,meaning all transfers occur in real time, and settlement isimmediate and final on the remitting and receiving banks’accounts with the Federal Reserve Bank. Wells Fargo isamong the largest Fedwire processing banks. Daylightoverdrafts are allowed in this network, but such overdraftsare closely monitored and controlled. A charge is assessedbased on the amount of the overdraft per minute.11

Every bank in the U.S. that maintains an account with thecentral bank (The Fed) is assigned an ABA number used tofacilitate specific business clearing needs, including highvalue payments, securities, ACH, checks, etc. Having an ABAnumber does not necessarily indicate a bank’s eligibilityto participate in the high-value payment system knownas Fedwire. It is common to have a series of ABA numbersdedicated to support check clearing and ACH, while aseparate and distinct ABA is maintained for the purposesof high-value payment (Fedwire). Each ABA consists of ninedigits.Wells Fargo kindly asks that you verify that an ABA numberis eligible to receive Fedwire payments before including it inyour high-value payments. The link to the Federal Reservewebsite where you can verify all ABA numbers is thefollowing: r-directory/index.html. Wells Fargo is one of the top5 users of Fedwire.Fedwire and CHIPS processing hoursCHIPS and Fedwire provide extended processing hoursto support global cross-border payment processing.Operating hours commence at 21:00 ET on the day prior tovalue date for both systems. The CHIPS processing ends at18:00 ET for third-party transactions. Third-party Fedwireprocessing ends one hour later, at 18:45 ET. Although allbanks in the U.S. can participate in the extended processinghours, only a few, very large correspondent banks choose totake advantage of the early opening. Wells Fargo is one ofthe large financial institutions that participate in the entireprocessing day. Many U.S. financial institutions choose tojoin the payment networks in the early U.S. morning (7:00— 8:00 ET).What are the implications of the extended Fedwire andCHIPS hours for you?The extended processing hours in the U.S. complementthe working hours in many international markets. Theprimary driver of extended hours is greater overlap of theU.S. payments systems with overseas markets. In additionto the risk mitigation benefits of the extended day, yourbeneficiaries will receive earlier posting and notification ofthe proceeds.ACHACH is a low-cost, low-value (deferred settlement) paymentsystem. It was originally designed as a replacement forthe check processing system in the United States. TheACH system links more than 8,000 financial institutionsin the U.S., including commercial banks, savings and loaninstitutions, and credit unions. Oversight responsibility forthe ACH network is provided by the National AutomatedClearing House Association (NACHA). NACHA setsguidelines and rules for its participating banks. ACH isa paperless, batch-based, store-and-forward paymentsystem. Settlement is accomplished by debiting andcrediting the Federal Reserve accounts of participatingfinancial institutions. ACH is used primarily for low-value,non-time-sensitive payments. Most ACH paymentstake two days to reach the beneficiary. Examples of ACHpayments include pensions, dividends, and direct payrolldeposit. Wells Fargo was one of the first banks in the UnitedStates to develop and employ an automated interfacebetween SWIFT and ACH using our GlobalPay.File service.Wells Fargo is one of seven banks that have organized itsown processing services as an ACH association through theElectronic Payments Network (EPN), formerly known asNYACH. Wells Fargo is one of the largest originators of ACHtransactions in the U.S.ChecksWhile use of checks is the most time-consuming of thevarious payment methods described, checks still remainsthe most popular form of payment in the United States.EuroWells Fargo partners with correspondent banks in theEuropean Union through our London branch to offer12

indirect participation in the main euro payment systems,TARGET2 and EBA EURO1, allowing us to ensure thatyour euro payments are effected quickly and efficiently.The following section gives a brief description of each ofthese payment systems used by our correspondent bankpartners:toward the system as a whole. EBA EURO1 is a privatesector-owned system used for domestic and cross-bordersingle payments in euro between banks operating in theEuropean Union. There are 22,203 BICs reachable via theEURO1/STEP1 participants as listed in the EURO1/STEP1directory.TARGET2EBA EURO1 is an alternative to TARGET2 similar toTARGET2, it is a SWIFT-based system with banks identifiedvia SWIFT BICs. Although it is a netting system, paymentsprocessed via EBA EURO1 are irrevocable and processedwith immediate finality.TARGET2 is the Real-Time Gross Settlement (RTGS)system for transactions in euro. TARGET stands forTrans- European Automated Real-Time Gross SettlementExpress Transfers. TARGET2 is the second generation ofTARGET. Payment transactions are settled one-by-one ona continuous basis in Central Bank money with immediatefinality. There is no upper or lower limit on the value ofpayments.Approximately 10,056 direct and 659 indirect participantsand 4,091 correspondents are accessible via TARGET2.TARGET2 is operated by the Eurosystem (the EuropeanCentral Bank and other EU Central Banks). Being an RTGSsystem, each payment is processed in real time, andsettlement is immediate across the accounts that bankshold with their Central Bank. The system operates usingSWIFT and the identification of banks within TARGET2 isthrough the use of the SWIFT BIC.TARGET2 opens at 7:00 Central European Time (CET) andcloses at 17:00 CET for customer payments. An additionalhour is available at the end of the day for direct participantsto square their positions.EBA EURO1EBA EURO1 is a same-day payment system run by theEuro Banking Association (EBA). Launched in 1998, EBAEURO1 was developed in order to provide an efficient,secure, and cost-effective net settlement infrastructure,but with immediate finality for all euro high-value paymentsprocessed. Similar to the CHIPS system for USD, EBAEURO performs rolling multilateral netting and settlementthroughout the day among its 51 participant banks. EachEBA EURO1 participant only has one single obligation/claimEURO1 opens at 7:30 CET and closes at 16:00 CET forpayment processing. During the final settlement window,members’ final positions are sent by EBA Clearing to eachmember. A member with an end-of-day obligation is topay to EBA EURO1 for its obligation via TARGET2 and amember with an end-of-day claim receives the claim viaTARGET2 from EBA EURO1. The service provides a uniqueRTGS-equivalent multilateral net settlement arrangement,duly approved by the European Central Bank (ECB).Other euro systemsThere are other euro payment systems, which are describedbriefly below. Wells Fargo is not a direct member but, wherenecessary, can access the systems via a partner to provideyou with the services you need. Some of the systems are forintra-EU payments only and relate to various regulationsand directives of the European Union to have all intra-EUpayments treated as domestic rather than cross-border.STEP1This is effectively the same as EURO1, but members arenot able to settle directly. Members of STEP1 have to usea EURO1 member to settle their end-of-day obligations.The membership comprises banks that do not comply withthe strict EURO1 admission criteria. On a daily basis, STEP1processes approximately 20,000 tran

About Wells Fargo payment products 3 About Wells Fargo 3 Our global presence 4 Industry and regulatory updates 5 High-level payments overview 11 U.S. government regulations on the processing of your payments 15 How your payments are processed by Wells Fargo 17 Wells Fargo's USD payment products 18 GlobalPay.FX Formatting Guidelines - SWIFT 20 .