The SEPA Regulation Guidance

Transcription

1 The SEPA Regulation Guidance May 2013*

2 *This guidance was previously developed and published by Payments Council, which was replaced by a new trade association Payments UK - at the end of June To this end the documentation has been rebranded but the content has not been updated, therefore the original date of the guidance on the front of the document should be referenced as at the time of original publication. Contents 1. Introduction 1.1 About Payments UK 1.2 Background 1.3 Purpose of this document 1.4 Legal Disclaimer 2. Overview of the structure of the SEPA Regulation 3. Key changes introduced by the SEPA Regulation 4. Guidance on interpretation, implementation and compliance 5. Key dates from a UK perspective 6. What derogations will the UK utilise under the transitional provisions? 7. Useful sources of information 7.1 Regulation texts 7.2 Other SEPA Regulation guidance documents 7.3 Information regarding migration 7.4 Websites of the key European bodies involved in SEPA related developments 8. Annex: Frequently Asked Questions

3 Payments UK is the trade association launched in June 2015 to support the rapidly evolving payments industry. Payments UK brings its members and wider stakeholders together to make the UK s payment services better for customers and to ensure UK payment services remain world-class. Payments UK s main roles: To be the payments industry s representative body: providing an authoritative voice in the UK, Europe and globally, and working with stakeholders to share payments knowledge and expertise. To be a centre for excellence: supporting the UK payments industry to provide world-class payments, building on the experience, thought-leadership and project delivery expertise behind award-winning initiatives such as Paym, the Current Account Switch Service and Faster Payments. To deliver collaborative change and innovation: working on behalf of our members to benefit customers and UK plc, ensuring their needs are understood and met, both now and in the future. The Single Euro Payments Area (SEPA) forms a key part of the European Union s Vision of a Single Market. It refers to the creation of an integrated payments market intended to provide consumers and businesses with secure, competitively-priced, user-friendly and reliable retail euro payment services. As defined by the European Payments Council, the geographical scope of SEPA extends to all 27 European Union Member States, the 3 additional countries of the European Economic Area (EEA), namely Norway, Iceland and Liechtenstein and also Switzerland, Monaco, Mayotte and Saint Pierre-et- Michelon. SEPA requires a process of harmonisation such that there is no distinction between national and crossborder payments, which can be carried out under the same basic conditions and in accordance with the same rights and obligations, regardless of their location within the European Union. While significant progress towards SEPA has been made, there has also been widespread agreement on the need for regulatory intervention at European Union level to ensure the migration of existing national euro payments to SEPA payments within a reasonable time frame, in order to attain the full benefits.

4 As a result, the European Commission published a proposal on 16 December 2010 for a Regulation of the European Parliament and of the Council establishing technical requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009, henceforth referred to as the SEPA Regulation. The SEPA Regulation was formally adopted by the European Parliament (on 14 February 2012) and the Council of the European Union (on 28 February 2012). It was published in the Official Journal of the European Union on 30 March 2012 and entered into force the following day. Payments UK is issuing this document to aid UK payment service providers ( PSP ) interpretation of, and compliance with, the SEPA Regulation. To this end the document seeks to: Provide an overview of the SEPA Regulation Flag key changes introduced by the SEPA Regulation Highlight key dates from a UK perspective Address the UK approach to the Transitional Provisions, which allow Member States to apply derogations Point towards useful sources of information providing implementation guidance Provide a list of Frequently Asked Questions Promote a consistent approach to interpretation across Europe. It will be of relevance to all UK PSPs offering euro credit transfer and/or direct debit services in at least one EEA country. This document is not intended to constitute legal or other advice nor designed to be used as a substitute for legal advice on the SEPA Regulation as it applies to each PSP. The guidelines have no legal status; ultimately, the implementation and interpretation of the SEPA Regulation is a matter for the English courts and the relevant competent authorities. While these guidelines have been prepared in good faith, Payments UK does not accept any responsibility for any loss or damage caused or suffered by any person who relies upon this document and the guidance contained in it. These guidelines meet the requirements placed on industry bodies to comply with the Competition Act 1998.

5 The SEPA Regulation comprises a set of Recitals and Articles as well as an Annex. A table providing an overview is set out below. Section/Article Overview Recitals (1-38) Recitals The background to the SEPA Regulation, its purpose and objectives Art. 1 Subject Matter and Scope Details the scope of the SEPA Regulation and also sets out which types of payment transactions fall out of scope Art. 2 Definitions Defines the terminology used within the SEPA Regulation Art. 3 Reachability Sets out the reachability requirements for PSPs with regard to credit transfers and direct debits Art. 4 Interoperability Outlines the conditions for credit transfer and direct debit schemes and states the

6 Section/Article Overview Art. 5 Requirements for credit transfers and direct debit transactions Addresses the following: Requirements for PSPs and/or Payment Service Users ( PSUs ) with regard to the use and/or provision of: - payment account identifiers and message formats - data elements - mandate-related information, consent and refund rights Elimination of the BIC in the PSU-to-PSU and the PSU-to-PSP space Consumer protection obligations for PSPs with regard to direct debits Art. 6 End-dates Sets the end-dates by when: Credit transfers and direct debits must comply with the technical requirements stipulated by the SEPA Regulation Interchange fees for direct debits can no longer apply Art. 7 Validity of mandates and right to a refund Provides that legacy direct debit mandates or authorisations and related refund conditions in place before 1 February 2014 will remain valid after that date Art. 8 Interchange fees for direct debit transactions Establishes a ban on per transaction multilateral interchange fees for direct debits and lays down conditions for an exception for R-transaction multilateral interchange fees, with similar effects for unilateral and bilateral arrangements between PSPs

7 Section/Article Overview Art. 9 Payment accessibility Prohibits PSUs making or receiving a credit transfers or direct debits from specifying in which Member State the payment account of their counterparty should be located, as long as the account is reachable in accordance with Article 3 Art. 10 Competent authorities Places a requirement on Member States to designate competent authorities responsible for ensuring compliance with the SEPA Regulation Art. 11 Penalties Member States are required to define and implement penalties that will apply to any breaches of the SEPA Regulation by 1 February 2013, although such penalties will not apply to consumers Art. 12 Out-of-court complaint and redress procedures Member States must establish rules for alternative dispute resolution procedures for disputes between PSUs and their PSP and appoint the responsible authorities Art. 13 Delegation of power The European Commission is empowered to adopt delegated acts to enable it to alter the technical requirements defined in the Annex to the SEPA Regulation Art. 14 Exercise of the delegation The European Commission can use its powers to adopt delegated acts subject to certain conditions Art. 15 Review The European Commission is required to present a report to the European Parliament, Council etc on the application of the SEPA Regulation by 1 February 2017

8 Section/Article Overview Art. 16 Transitional provisions Individual Member States can opt for certain derogations and allow certain requirements specified within the SEPA Regulation to come into force at a later date. In addition, later end-dates with respect to some of the provisions apply to euro transactions in non-euro Member States Art. 17 Amendments to Regulation (EC) No 924/2009 The SEPA Regulation introduces amendments to Regulation (EC) No 924/2009, the Cross-Border Payments Regulation Art. 18 Entry into force States that the SEPA Regulation enters into force one day after its publication in the Official Journal of the European Union, namely 31 March 2012 Annex Technical requirements (Article 5) Provides a detailed list of technical requirements for credit transfers and direct debits in euro

9 The SEPA Regulation introduces a number of changes, key amongst which are the following: End-dates: the SEPA Regulation sets a migration end date of 1 February 2014 in euro Member States and 31 October 2016 in non-euro Member States (or one year after joining the euro, if earlier) by when existing national euro credit transfer and direct debits must be replaced by SEPA Credit Transfers and Direct Debits. Message Formats: the ISO XML standard is to be used for message formats in the interbank space and by PSUs (that are not consumers or micro-enterprises) that send or receive payments in batch files; in addition, there is a requirement on PSPs to ensure that PSUs submitting batch payment files do so in the ISO XML format. Business Identifier Code (BIC): the removal of the mandatory requirement for the payer or payee to provide the BIC for the initiation of a payment transaction. Reachability: establishes a requirement for European-wide reachability for PSPs who are reachable for euro credit transfer and direct debit services at national level. Interoperability: technical interoperability between payment systems within the European Union through the use of standards developed by international or European standardisation bodies. Multilateral Interchange Fees: per transaction multilateral interchange fees (MIFs) for direct debits to be phased out while MIFs on R-transactions will be allowed subject to certain strict conditions. Consumer Protection Measures: introduces additional protection measures for consumers with regard to direct debits. Payment Accessibility: PSUs are prohibited from specifying the Member State in which the payment account of their counterparty is to be located when making or receiving credit transfers or direct debits. Amendments to Regulation (EC) No 924/2009: in particular (i) the removal of the ceiling of EUR 50,000 on the 'principle of same charges' so that it applies to euro denominated payments of any value, and (ii) the removal of settlement-based national reporting obligations on PSPs for balance of payments of any value (not just below EUR 50,000) from 1 February 2016.

10 The whole concept of SEPA revolves around the principles of integration and harmonisation. Accordingly, it is important for there to be a consistent interpretation of the SEPA Regulation by PSPs across Europe as part of the implementation process. To this end it should be noted that practical implementation guidance has been produced at European level by the Payments Regulatory Expert Group (PREG) of the European Banking Federation (EBF). A copy of the guidance can be accessed from the European Payments Council s website: The PREG has closely reviewed the SEPA Regulation with input from across its membership and in conjunction with the European Payments Council, the European Association of Co-operative Banks, MasterCard and Visa. It provides clarity on a range of practical questions related to the SEPA Regulation and includes a step-by-step analysis of each article included within this legislative act. Payments UK guidance on the SEPA Regulation should be read in conjunction with the EBF PREG guidance.

11 Date Action Application 31 Mar 2012 Payment accessibility (Art. 9) Amendments to Regulation 924 (Art. 17) Obligation for eurozone-based PSPs to be reachable for SEPA payments (Art. 3) 1 Nov 2012 Prohibition of per-transaction multilateral interchange fee (MIF) for cross-border direct debits (Art. 6.3) UK-located PSPs: Must comply with Art. 9 on payment accessibility and the amendments to Regulation 924 by 31 March As per Art 16 (2), the requirement to be reachable for SEPA payments is deferred until 31 October 2016 Must comply with Art. 9 on payment accessibility, the amendments to Regulation 924, and the reachability obligations under Article 3 by 31 March 2012 UK-located PSPs: Not applicable Must comply with the prohibition on MIF for cross -border SEPA direct debits from 1 November 1 Feb 2013 Notification of the competent authorities responsible for compliance with the Regulation (Art. 10.2) Member States shall lay down rules on the penalties applicable to infringements on the Regulation (Art. 11.1) Notification of bodies responsible for out-of-court complaint and redress procedures (Art. 12.2) Member States to notify the EC if they plan to make use of any derogations listed in Articles 16.1, 3, 4, 5 and 6 (Art.16.7) In the UK, legislation 1 took effect on 15 January 2013 to implement these aspects of the SEPA Regulation 1 The Payments in Euro (Credit Transfers and Direct Debits) Regulations 2012 were laid before Parliament on 18 December 2012 and come into force on 15 January A copy is available here: uksi/2012/3122/body/made See page 16 for more detail.

12 Date Action Application 1 Feb 2014 End-Date for legacy national credit transfers and direct debits. Requirement to apply the technical requirements of the pan-european schemes (Art. 6.1 and 6.2) N.B. By way of transitional provisions, there are derogations from the deadlines in Art 6 in Art 16(1), (3), (4), (5), or (6) 1 Feb 2014 Provision of the BIC no longer mandatorily required for national payment transactions (Art. 5.7) The UK has no legacy national euro credit transfer or direct debit systems. UK-located PSPs: As per Art 16(8), the deadline to apply the technical requirements is 31 October 2016 Must apply the technical requirements by 1 February 2014 unless the MS the branch is located in has applied the derogations listed in Art 16(1), (3), (4), (5), or (6) UK-located PSPs: As per Art 16(8), the deadline is 31 October N.B. As per 16(6) eurozone MS can utilise an extended transition option [so that the requirement for BIC remains in place] until 1 February Feb 2014 Interoperability requirements in eurozone MS (Art. 4) Must comply with the provision by 1 February 2014 unless the MS the branch is located in has applied the transitional option, in which case the 1 February 2016 deadline applies UK-located PSPs: As per Art 16(8), the deadline is 31 October 2016 Must comply with the provision by 1 February Feb 2014 End-Date for the issuance of new direct debit mandates based on national formats (Art. 7.1) UK-located PSPs: Not applicable in the UK as the UK national direct debit scheme does not facilitate payments in euros Must comply with the provision by 1 February 2014

13 Date Action Application 1 Feb 2016 Provision of the BIC no longer mandatorily required for cross-border payment transactions (Art 5.7) UK-located PSPs: As per Art 16(8), the deadline is 31 October 2016 Must comply with the provision by 1 February Feb 2016 End of transition period allowing PSPs to offer BBAN/IBAN conversion services to PSUs that are consumers to convert national payments into IBAN (MS option) (Art 16.1) 1 Feb 2016 End of transition period for legacy niche products with a cumulative market share of less than 10% of the total national credit transfers and direct debits (MS option) (Art 16.3) UK-located PSPs: As per Art 16(8), these PSPs do not need to ensure that the payment account identifier is the IBAN until 31 October 2016 If the branch has been offering conversion services to consumers this should end by 1 February 2016 UK-located PSPs: Not applicable in the UK Some eurozone MS are making use of the waiver that applies until 1 February 2016 for niche schemes and therefore branches should investigate whether this is applicable to them 1 Feb 2016 End of transition period for payment transactions generated using a payment card at the POS (e.g. the German Elektronisches Lastschriftverfahren (ELV)) (MS option) (Art 16.4) UK-located PSPs: Not applicable in the UK Branches located in Austria or Germany that offer this type of payment to their customers will need to migrate these payments by 1 February 2016

14 Date Action Application 1 Feb 2016 End of transition period for the exception to the mandatory use of ISO XML standard for bundled together payments (MS option) (Art 16.5) UK-located PSPs: As per Art 16(8), these PSPs do not need to ensure that the message format is used by PSUs submitting/receiving bundled payments until 31 October 2016 However, as per Art 16(5), PSPs shall fulfil the requirements set out in Art 5(1)(d) where a PSU requests such a service Must use this message format by 1 Feb 2014 unless the MS the branch is located in has applied the transition option, in which case the 1 February 2016 deadline applies. However, as per Art 16(5), PSPs shall fulfil the requirements set out in Art 5(1)(d) where a PSU requests such a service 1 Feb 2016 End of transition period under which MS can defer the requirement for IBAN only for national payment transactions (MS option) (Art 16.6) UK-located PSPs: As per Art 16(8), these PSPs can continue to require the BIC until 31 October 2016 The deadline is 1 February 2014 unless the MS the branch is located in has applied the transitional option, in which case the deadline by when a PSP can no longer require the BIC for national payments is 1 February Feb 2016 Removal of (national) settlementbased reporting obligations for PSPs by 1st February 2016 at the latest (Article 5.1 of Regulation 924/2009) (Art 17.4)

15 Date Action Application 31 Oct 2016 Reachability obligations for PSPs in non-eurozone MS offering payment services denominated in euro. If euro becomes a national currency before 31 October 2015, PSPs to be reachable within one year (Art 16.2) 31 Oct 2016 End-date for migration to pan- European payments schemes for euro payments for non-eurozone MS. If euro becomes a national currency before 31 October 2015, compliance one year after joining the euro (Art 16.8) 31 Oct 2016 Interoperability requirements for PSPs in non-eurozone MS. If euro becomes a national currency before 31 October 2015, compliance one year after joining the euro (Art 16.8) UK-located PSPs: UK PSPs that offered euro credit transfers or direct debits when the SEPA Regulation came into force need to be reachable for the SEPA Schemes by 31 October 2016 These PSPs were required to be reachable as of 31 March 2012 UK-located PSPs: UK PSPs that offered euro credit transfers or direct debits when the SEPA Regulation came into force need to have migrated to the SEPA Schemes by 31 October 2016 These PSPs are required to migrate to the SEPA Schemes by 1 February 2014 UK-located PSPs: UK PSPs that offered euro credit transfers or direct debits when the SEPA Regulation came into force need to have migrated to the SEPA Schemes by 31 October 2016 to be interoperable These PSPs are required to migrate to the SEPA Schemes by 1 February 2014 to be interoperable 1 Feb 2017 No multilateral interchange fees per national direct debit transaction (Art 6.3) Not applicable in the UK as the UK national direct debit scheme does not facilitate payments in euros By 1 Feb 2017 Review: Report to be issued by the European Commission to the European Parliament and Council on the application of the SEPA Regulation, if appropriate with proposal (Art 15)

16 The Payments in Euro (Credit Transfers and Direct Debits) Regulations 2012 were laid before Parliament on 18 December 2012 and came into force on 15 January Article 19 of these Regulations states what derogations are being applied. Due to the fact that Articles 16(2) and 16(8) of the SEPA Regulation exempt PSPs located in, and PSUs making use of a payment service in, a Member State which does not have the euro as its currency (i.e. the UK) from complying with the requirements of Articles 3, 4 and 5 until 31 October 2016, it was not necessary for the UK to take advantage of the transitional provisions provided for in Articles 16(1), 16(3), 16(4), 16(5) and 16(6). The text of Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits and amending Regulation (EC) No 924/2009 (the SEPA Regulation) can be found at: The text of Regulation (EC) 924/2009 on cross-border payments in the Community and repealing Regulation (EC) No 2560/2001 can be found at:

17 This guidance document should be read in conjunction with the European Banking Federation s Payments Regulatory Expert Group (EBF PREG) guidance document, which can be found here: In addition, the European Banking Association (EBA) has produced guidance, which can be found here: SEPA_Migration.pdf The European Commission (EC) has and will continue to compile information regarding SEPA migration. The EC website contains an overview of what derogations and options (Art. 16) are being utilised by Member States. It is available here: European Commission: European Central Bank: European Payments Council:

18 No; article 3 of the SEPA Regulation on reachability only applies to PSPs that are currently reachable for euro credit transfers or direct debits. In other words, if a PSP was offering euro credit transfers or direct debits at the time of the publication of the SEPA Regulation (30 March 2012), or decided to offer them subsequently, then it will need to comply with the requirements of the SEPA Regulation. Otherwise if a PSP has never offered euro credit transfers or direct debits (but rather operates solely in sterling or other non-euro currencies) there is no obligation for it to comply with the requirements of the SEPA Regulation. For PSPs located in the UK that do currently offer euro credit transfers and/or direct debits, then, as per article 16(2), the reachability obligations in article 3 must be complied with by 31 October For eurozone branches of UK PSPs offering euro credit transfers/direct debits, the deadline for compliance by those eurozone branches with Article 3 was 31st March For further information on reachability please see to Payments UK Guidelines on Regulation 924 on crossborder payments: regulation_924_on_crossborder_payments_in_the_community/ Article 3 (Reachability) of the SEPA Regulation states that a PSP that is reachable for a euro credit or debit payment must be reachable via a Union-wide payment scheme. At present the only pan-european Euro credit transfer and direct debit schemes are the EPC s SEPA schemes. Therefore, PSPs that need to be reachable in accordance with the SEPA Regulation (see the answer to Q1) will need to adhere to the EPC schemes by signing an adherence agreement with the European Payments Council (EPC), who are the scheme owners, and by meeting the necessary technical requirements. The EPC updates its Scheme Rulebooks on an annual basis following public consultation. Usually, updated Rulebooks are prepared in August or September and then go live in November. However, following publication of the SEPA Regulation, the EPC decided that it would be more practical to delay the 'go live' date for the updated Rulebooks from November 2013 until February 2014 in order to bring the timetable in line with that of the SEPA Regulation.

19 In relation to national payments, Article 16(1) of the SEPA Regulation takes precedence meaning any PSP offering conversion services to PSUs until 1 February 2016 must do so free of charge. In relation to crossborder payments, Article 17(3) of Regulation 924 takes precedence meaning any PSP executing crossborder payments where the PSU has failed to provide the IBAN can agree and charge the PSU an appropriate cost for such services. No; the currency of the underlying account used to send or receive a SEPA payment is not relevant to determining the scope of by the SEPA Regulation, which turns upon the location of the PSP and the currency of the payment transaction (not the account from or to which it is made). Article 1 defines the scope of the SEPA Regulation as follows: "credit transfer and direct debit transactions denominated in euro within the Union where both the payer s payment service provider and the payee s payment service provider are located in the Union, or where the sole payment service provider (PSP) involved in the payment transaction is located in the Union". The relevant implementation deadline is determined by the location of the PSP. In this example, if the PSP is providing services through a branch, in, say, France, then the French deadlines will apply. If, however, it is providing services in France on a cross-border basis (i.e. without establishing a branch in France), then the deadline of its 'home' (non-eurozone) Member State will apply. Please see Q14 below which addresses the same question the location of a PSP in the context of Regulation 924, and also the Payment UK's Guidance on Regulation 924.

20 As per Article 16(8), PSPs located in non-eurozone countries (such as the UK) do not need to comply with Articles 4 and 5 of the SEPA Regulation until 31 October Nonetheless, Article 16(5) of the SEPA Regulation still grants PSUs the right to request their PSP to use this message format for initiating and receiving bundled payment orders from 1st February Therefore, it is recommended that PSPs are at least in a position to meet such requests by 1st February Furthermore, in order to ensure that they are not at a disadvantage, some PSPs and corporates may wish to become SEPA-ready earlier than the 31 October 2016 deadline. The SEPA Regulation states that from 1 February 2014 for national SEPA payments and from 1 February 2016 for cross-border SEPA payments, PSUs can no longer be required by their PSP to provide a BIC when initiating a payment. However, as the UK is not a eurozone country, Article 16(8) applies, which defers the deadline for IBAN-only to 31 October However, it should be noted that this only applies to SEPA payments payments sent abroad in other currencies (e.g. Dollars or Sterling) or sent in euro but to a destination outside SEPA will still require the BIC. The industry is currently exploring the options around how to process IBAN-only payments, for example by using national databases. Such databases are necessary because although in the majority of cases it will be possible to reliably identify the BIC from the IBAN, in a small number of cases it will not be (for example, following mergers and acquisitions). It is possible that an additional solution will need to be developed to deal with the smaller number of consumer transactions that are cross-border. Although the UK has a later deadline for IBAN-only, it is actively participating in these discussions as it is important that the solution arrived at for deriving the BIC for the 2014 eurozone deadline is equally workable/scalable for the 1 February 2016 cross-border deadline. It should be noted that there are reasons why some corporates may choose to continue to provide the BIC. For example, corporates (especially those with higher volumes of payments) will be familiar with providing both the BIC and IBAN and use of the BIC may be embedded in their systems. In addition, some corporates may have agreed different liability arrangements with their PSP to those under Article 75 of the PSD (which provides for liability in the event a PSP incorrectly derives the BIC from the IBAN and the payment does not reach the payee) as there is an opt-out for corporates. PSPs should discuss all aspects of SEPA migration with any business customers that make/receive euro payments.

21 The SEPA Regulation requires: in-scope payments to be processed via a SEPA Regulation-compliant scheme; PSPs to make themselves reachable via such schemes; and PSPs to initiate in-scope payments in ISO XML format, etc. However, it does not explicitly govern how a PSP should route a payment. PSPs remain free to determine payment routing (subject to anything they may have agreed with their customers). This is indeed about legal validity. It will be important when migrating mandates for corporates to ensure that a unique Mandate reference and Creditor ID are added to the information for the debtor. From a legal perspective, they will be able to continue collecting payments based on the old mandate using the SEPA scheme, however, they will have to ensure this additional data is provided to their PSP as well as to their debtor. In addition, it should be noted that the SEPA Regulation provides a specific limitation and protection under Article 7(2) that makes it clear that there can be no reduction in the refund rights following migration of the legacy mandates for use in the SEPA schemes. As regards the submission of information to initiate a SEPA direct debit, the creditor must respect the requirements of the SEPA Regulation regarding format, i.e. use of XML at the appropriate points in the processing cycle. Where the sending PSP is from a non-euro country and it uses the services of a eurozone PSP for clearing and settling SEPA payments (sending legacy format messages which the latter converts on its behalf into XML), the non-euro PSP is permitted to continue sending messages to the eurozone PSP in the legacy format for it to convert until the 31 October 2016 deadline in line with article 16(8). The eurozone PSP may, however, decide to stop accepting such legacy formatted messages before this date (because it will need to migrate to the ISO XML format earlier for its own compliance).

22 It is our understanding that the technical formats specified by the SEPA Regulation do not have to be used by PSPs on a mandatory basis for the internal processing within the PSP of on-us transactions (i.e. where the Payer s and Payee s payment accounts are with the same PSP). However, the parts of on-us transactions that are customer-related and/or are routed through an external payment system are clearly in the scope of the Regulation and therefore the ISO XML format must be used. The lead competent authority will be that of the Member State where the non-eurozone PSP has established a branch (see also Q6 above regarding the location of a PSP). However, the competent authority of the home Member State (in this case the UK) may also take an interest. The transfer of files purely for the purpose of sanctions checking (and not making payment transactions) falls outside the scope of the SEPA Regulation, leaving the PSPs concerned to determine between them (or with any third party provider) the format to be used for such file transfers. It may be that where this element of the process is inextricably linked with the execution of a payment transaction, that operationally the format used for this element is driven by the format requirements under the SEPA Regulation for the resulting payments. This includes where the underlying payer/payee information is required by applicable law to accompany the payment transaction. It is our understanding that the SEPA Regulation does not preclude customers located outside of the EU/ EEA from benefiting from SEPA by obtaining services from a PSP located within the SEPA area. This would logically extend also to PSPs acting as clients of a SEPA compliant PSP located within the EU but subject of course to AML and other regulatory compliance considerations, and the need to respect the conventions of the SEPA data set.

23 Although the SEPA Regulation is silent on this matter, the EBF s SEPA Regulation Guidance addresses this point. In addition, footnotes to (i) a paper prepared by the ECB and European Commission for the (subsequently cancelled) 13 March 2013 EU SEPA Council meeting on SEPA migration and (ii) the ECB s SEPA Migration Report March 2013 clearly state that In a post-migration environment (February 2014 or February 2016, respectively), PSPs could still offer conversion services, provided that these services are, operationally, fully independent from all subsequent payment services offered by that PSP. The conversion would take place prior to the receipt of the payment instruction by the PSP.