The global payments infrastructure currently comprises of a multitude of variable messaging standards and formats to process transaction information. The lack of harmonization and interoperability has resulted in inefficiencies, operational and compliance risk.
To address these shortfalls a new global open message standard for payments, ISO 20022, has been created and is being adopted by all major payment infrastructure providers. ISO 20022 comes into force in November 2022.
ISO 20022 provides a common language and model for payments data, improving data quality across the payments landscape. This rich, structured model brings efficiency benefits, improves compliance, and enables new kinds of business. It represents a transformational change impacting the financial industry.
ISO 20022 allows financial institutions to include significantly more detailed payment information such as counterparty and remittance information. The enriched data increases payment transparency and provides the full background of the transaction history, which supports compliance departments during investigations.
Financial institutions need to be certain that the tags and fields in the new ISO format are understood by their sanctions screening systems. In cases where the filter needs to be instructed on each of the fields to screen, financial institutions should update the system configuration to include all the necessary fields. They should also consider designing rules in order to prevent a large number of false positives. It is therefore essential that compliance teams make informed decisions on what data fields require screening based on the data they receive and the requirements of their sanctions policy.
Furthermore, ISO will enable financial institutions to share a higher standard of information with law enforcement and other payment providers, consequently strengthening their ability to combat and prevent financial crime.
To ensure readiness, financial institutions need to upgrade their payment messaging interface. Not being ready will mean a break in the continuity of business operations.