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Bank for International Settlement (BIS) – Basel Committee on Banking Supervision

Promoting monetary and financial stability is one key objective of the BIS. Bimonthly meetings of the Governors and other senior officials of the BIS member central banks to discuss monetary and financial matters are instrumental in pursuing this goal. The standing committees located at the BIS support central banks, and authorities in charge of financial stability more generally, by providing background analysis and policy recommendations.

Transparency Regarding Cover Payment Messages (MT202COV)

May 2009 – Due diligence and transparency regarding cover payment messages related to cross-border wire transfers

The Basel Committee has published views on supervisory expectations relating to transparency in payment messages, particularly in anticipation of changes to technical standards for cross-border wire transfers.

The processing of cross-border wire transfers frequently involves several financial institutions. In addition to the originator’s bank and the beneficiary’s bank, additional banks are often involved. This paper examines the circumstances where one or more of these intermediary banks is located in a jurisdiction other than the jurisdictions where the bank of the originator and the bank of the beneficiary are located. It describes the supervisory expectations, pursuant to the current initiatives supported by the Basel Committee to enhance transparency in payment messages, about information that must be included in payment messages related to cover payments, the various mechanisms that must be used to ensure that complete and accurate information has been included in such messages, and the use that should be made of the information for AML/CFT purposes.

The final version of this paper was released in May 2009 BIS154- May 2009.

Transparency in payments messages

October 2007 – Basel Committee newsletter No 12 – The Basel Committee welcomes the dialogue between the public and private sector over the issue of enhanced transparency for cover payments initiated by the industry through the Wolfsberg Group and the Clearing House Association as well as the proposals under discussion in the SWIFT community to increase the transparency of transfers. A solution improving transparency in international payments should aid anti-crime efforts worldwide.

Cover payments are used in correspondent banking in particular to execute transfers ordered by customers in foreign currencies. This technique of cover payments has advantages for banks, but the current messaging standards do not ensure full transparency for the intermediary banks on the transfers they are helping to execute. This has in some cases raised concerns about the risk that such a type of message could be chosen on purpose to conceal the names of parties to a transaction and about the ability of the intermediary banks to comply with their obligations.

The Committee encourages the industry, which is best placed to design the technical solutions to meet this challenge, to proceed with all the necessary changes in order to implement as soon as feasible these solutions for all relevant standards of messages.

The Committee encourages the effective and genuine use of such solutions.

The Committee has asked its AML/CFT Expert Group to review the supervisory issues related to cover payments and the industry’s initiative, in coordination with all interested stakeholders and in particular the FATF, overseers of payment systems and the industry, in order to reach a consensus on principles informing supervisory policies and priorities for the implementation of the transparency rules.

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