New regulations seek to ensure a ten-second maximum time frame for euro credit transfers.
In February of this year, MEPs passed new regulations to ensure that retail clients and businesses across the EU, including contractors, receive their funds immediately without any waiting time. The main objective is to enhance the safety of transfers. As such, financial institutions such as banks and other payment service providers (PSPs) will be required to guarantee that credit transfers are processed instantly and priced reasonably.
Where will these regulations apply?
The new regulations will update the current Single Euro Payments Area (SEPA) legislation and apply to all member states, including those whose currency is not the euro. However, there will be a more extended transition period for accounts that already provide regular euro transactions. Such accounts may be exempted outside business hours due to potential concerns regarding access to euro liquidity.
What is required of PSPs?
The new rules require banks and PSPs to execute instant credit transfers within ten seconds, regardless of the time or day of the week. The payee should be informed within ten seconds whether or not the funds have been made available to the recipient. PSPs must have secure and updated fraud detection and prevention measures in place to avoid fraudulent activities or errors. Additionally, PSP customers may set a maximum amount in euros for instant credit transfers, which can be changed easily before the next transfer is executed.
PSPs should verify whether their clients are subject to sanctions or other restrictive measures related to money laundering and terrorist financing. The charges applied by PSPs for instant credit transfer transactions in euros should not be higher than those used for non-instant credit transfer transactions in euros.
Potential sanctions for non-compliance:
PSPs should verify whether their customers are subject to restrictive measures related to money laundering, terrorist financing, or other sanctions. PSPs will be required to fulfil all their duties under fraud prevention. If a PSP's client/customer becomes a victim of financial damage as a result, they can require the service provider to compensate them under the new regulations.
When will these regulations come into effect?
The new rules are expected to be enacted 20 days after publication in the EU Official Journal. PSPs in the euro area will have nine months to receive instant credit transfers in euros and 18 months to send them. Michiel Hoogeveen, the lead MEP, stated that the Instant Payments Regulation is a significant and long-awaited modernisation of payments in the European single market. Visit the official website to learn more.
In Conclusion:
The new regulations intend to prioritise protecting customers' data and information through updated and reliable identity verification and fraud detection. Additionally, these regulations will allow customers to set limits for their instant transfers without incurring high charges for instant payments, making it easier for international contractors.
If you are an international contractor or an organisation hiring international contractors and want to learn more about how these new regulations affect you, don't hesitate to contact our team today.
