Improving compliance with ISO 20022
By : Andrew Short
May 10, 2016 01:00 PM
The financial messaging standard ISO 20022 holds immense potential in
a number of key areas of banking, but perhaps none more so than in the
field of compliance, regulatory reporting and auditing.
Financial institutions must address Know Your Customer (KYC) and Anti-
Money Laundering (AML) rules. In the US, specific regulations such as the
Bank Secrecy Act (BSA), the USA PATRIOT Act, and the Office of Foreign
Assets Control (OFAC) regulations add to the compliance minefield. It
goes even further, with governments requiring banks to provide more
detail on payments like Know Your Customer’s Customer (KYCC), which
can require data like dates of birth and passport numbers.
According to a report from NACHA, the situation is only going to get
stricter.
“While historically financial institutions were under no obligation to provide complete information on all parties in
a payment, it is anticipated that in the future, global regulators may prevent banks from processing transactions
when all party information cannot be validated for international payments,” it said.
Tougher regulation mean there is a need for richer information. ISO 20022 helps to not only mean we can send
more data with a payment, but also structure in such a way as to ensure it can be efficiently processed.
If we take the traditional standard used for cross-border payments with SWIFT MTs, names and addresses are
found within a block of information that makes it complicated and vulnerable to manual error.
The new messaging standard is different, as one financial services executive explained to NACHA: “ISO 20022
supplies more granular information—you know the precise data and exact location. There is no doubt whether
you’re screening a name, or you’re screening a country or you’re looking at a street name.”
Richer data not only helps with compliance in the first instance, but also makes the task of extracting and sharing
information with the relevant authorities much easier.
“ISO 20022 provides a solid foundation for standardized global reporting. It is critical that entities interpret and
report data in the same way,” adds NACHA.
With payment regulations only getting tougher, the ISO 20022 messaging standard will prove increasingly useful
for banks.
