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Information on the payer accompanying transfers of funds

As part of the EU Action Plan for combating terrorism, the proposal in question lays down rules aimed at establishing the traceability of transfers of funds which are applicable to all the payment service providers involved in the payment chain.

ACT

Regulation (EC) No 1781/2006 of the European Parliament and of the Council dated 15 November 2006 on information on the payer accompanying transfers of funds * .

SUMMARY

This Regulation lays down rules aimed at establishing the traceability of transfers of funds *. These rules will be applicable to all payment service providers (PSP) involved in the payment chain. The This Regulation aims to transpose into Community legislation Special Recommendation VII on "wire transfers" (SR VII) of the Financial Action Task Force (FATF *).

The Regulation does not apply to transfers of funds * which flow from a commercial transaction carried out using a credit or debit card or any other similar payment instrument, provided that a unique identifier allowing the transaction to be traced back to the payer accompanies all transfers of funds flowing from that commercial transaction and that the beneficiary has entered into agreement with the payment service provider enabling the payment of the provision of goods and services.

Furthermore, under the same conditions as the previous point, this regulation does not apply to transfers of funds carried out via a mobile telephone or any other digital device or linked to IT, when the payments are post paid and insofar as the payment service provider must comply with obligations stated by Directive 2005/60/EC.

In addition, the Regulation will not apply to transfers of funds where both the payer * and the payee * are payment service providers acting on their own behalf.

Under the Regulation, the payer's payment service provider * (PSP) must ensure that transfers of funds contain complete, accurate and meaningful information on the payer. Any intermediary PSP must also ensure that all information on the payer that accompanies a transfer is transferred with it or retained in an appropriate manner.

In turn, any payment service provider * of the payer must report suspicious transactions to the authorities responsible for combating money laundering and terrorist financing. The payee's PSP must be able to detect a lack of presence of information on the payer when receiving transfers and must take appropriate steps to correct this situation (refuse the transfer or ask for further information) so that received transfers of funds do not remain anonymous.

Accordingly, the name, address and account number of the person ordering the payment must always accompany the transfer. Access to this information will be granted to the competent authorities only for the purposes of preventing, investigating, detecting and prosecuting money laundering or terrorist financing.

An open consultation exercise on this Regulation was conducted online between 2 December 2003 and 15 February 2004. The Commission received 103 replies. The results are available on the website of the Directorate-General for the Internal Market.

Context: combating terrorist financing

In the European Union's revised Plan of Action to Combat Terrorism (PDF ) of 18 June 2004, the Council emphasised the importance of adopting measures designed to prevent the phenomenon of terrorist financing. The European Council of 25 March 2004 called on the Member States "to increase cooperation between national competent authorities, financial intelligence units and private financial institutions to facilitate improved exchange of information on terrorist financing".

In that same statement, the Council also asked the Commission to consider improvements on the regulation and transparency of non-profit bodies so as to prevent them from being used by terrorists to acquire funding for their activities.

For its part, the Commission adopted a communicationon prevention in this field in October 2004 and unveiled in December of that year the Union's strategy for combating terrorist financing. This document, drawn up on the basis of the proposals made jointly by the Commission and the Secretary-General High Representative, takes stock of measures implemented in this field and contains a list of recommendations for strengthening action by the Union.

Key terms used in the act
  • "Payee": A natural or legal person who is the intended final recipient of transferred funds.
  • "Payer": a natural or legal person who is the account holder and who allows a transfer of funds to leave the aforementioned account, or in the absence of an account, the natural or legal person who gives the order to carry out a transfer of funds.
  • FAFT: The intergovernmental body responsible for designing and promoting, at both national and international level, strategies to combat money laundering and terrorism financing.
  • "Payment service provider" (PSP): A natural or legal person whose business includes the provision of fund transfer services.
  • "Intermediary payment service provider": A payment service provider which is neither that of the payer nor that of the payee and which participates in the execution of transfers of funds.
  • "Transfer of funds": Any transaction carried out on behalf of a payer through a payment service provider by electronic means with a view to making funds available to a payee at another payment service provider, irrespective of whether the payer and the payee are the same person.

REFERENCES

ActEntry into force - Date of expiryDeadline for transposition in the Member StatesOfficial Journal
Regulation on information on the payer accompanying transfers of funds1.1.07-OJ L 345 of 8 December 2006

RELATED ACTS

Directive 2005/60/EC of the European Parliament and of the Council on 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing [Official Journal L 309 of 25.11.2005].

Commission Communication to the Council, the European Parliament and the European Economic and Social Committee - The prevention of and fight against terrorist financing through enhanced national high-level coordination and greater transparency of the non-profit sectorCOM(2005) 620 final- Official Journal C 122, 23.5.2006].

Communication from the Commission to the Council and the European Parliament of 20 October 2004 on the prevention of and the fight against terrorist financing through measures to improve the exchange of information, to strengthen transparency and to enhance the traceability of financial transactionsCOM(2004) 700 final- Not published in the Official Journal].

Communication from the Commission to the Council and the European Parliament of 20 October 2004 - Prevention, preparedness and response to terrorist attacksCOM(2004) 698 final- Not published in the Official Journal].

Council Regulation (EC) No2580/2001of 27 December 2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism [Official Journal L 344 of 28.12.2001].

Directive97/5/EC (BG) (CS) (ET) (GA) (LV) (LT) (HU) (MT) (PL) (RO) (SK) (SL)of the European Parliament and of the Council of 27 January 1997 on cross-border credit transfers [Official Journal L 43 of 14.2.1997].

Last updated: 12.12.2006

See also

For any further information:

"Freedom, security and justice" website of the JHA Directorate-General of the European Commission

"The EU Single Market" website of the Internal market Directorate-General of the European Commission:

"Area of security, freedom and justice" website of the European Parliament:

Website of the EU Council:

Council website on the Financial Action Task Force (FATF):

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