SEPA Country Guide Luxembourg. Introduction

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1 Introduction This document provides an overview of all the country specific information you need to successfully implement your migration to SEPA in Luxembourg. Intending to provide a global picture of the impact of SEPA on your organization, it will help you understand all the elements you need to take into account in order to migrate your payment activities. Comparing to other countries, Luxembourg has one main advantage concerning the SEPA migration: the current domestic formats already include accounts in IBAN format. Furthermore, the national clearing system LIPS-Net has been abolished in October 2006 to be replaced by the STEP2 platform provided by EBA. This facilitates already one of the main issues, but some other aspects have to be carefully considered as you will discover in this guide. REGULATORY UPDATE: ADDITIONAL TRANSITION PERIOD The European authorities agreed on allowing banks and other payment providers to process payments that differ from the SEPA format for an extra six months (amending EU Regulation N 260/2012). As a consequence, all parties (e.g. corporates, SMEs, and Public Administrations) may continue to send payments and collections through non-xml formats until 1 st of August Each Member State has taken a position towards the application of this proposal. In Luxembourg, DOM2009 direct debits are accepted until 31 st July 2014 (latest possible due date) but no new creditors may join this scheme and no new legacy mandates will be accepted by the debtor bank. Credit Transfers in legacy formats, which contain IBAN information, will remain accepted No decision about the deadline has been taken yet. 1

2 SEPA Credit Transfers (SCT) Overview of the domestic formats Today Luxembourg is supporting one domestic credit transfer format, additionally to SCT. This format is called VIR2000 and is based on the Swift MT101 format, adapted to the specific local requirements. To ensure compliance with the regulatory requirement, it is strongly recommended that clients make use of the XML format for initiating the SCTs. Comparison of domestic and SEPA transfers properties In Luxembourg, there is no local credit transfer scheme anymore (only the local format remain). While you are identifying your migration approach, make sure to understand all the related impacts by analyzing the below comparison table. VIR2000 (SCT Compliant) PAIN.001 (SCT compliant) File Format Tag-based (as MT messages) XML Does the local format allow SCT payments? Yes, all the mandatory information is foreseen in the format, including accounts in IBAN format Book date / Value date (without exchange) Debit: D Credit: Standard: D+1 Debit: D Credit: Standard: D+1 Settlement date Standard: D+1 Standard: D+1 N.B.: The accounts of the Debtor and of the Creditor may be in euro or any other currency. In the VIR2000 format, the presence of a BIC is not mandatory. BGL BNPP always derives the BIC from the IBAN even if the BIC is provided by the client. Implementation of the PAIN.001 PAIN.001 is the XML standard that supports SCT. In addition to considering the format provided by the EPC, two specific points must be taken into account: Choosing the correct version PAIN.001 currently exists in 3 versions. A company that starts its migration today and uses the local channel New Multiline should implement version PAIN , which is defined in the Rulebook 6 (downloadable on the EPC website). Local specificities regarding the PAIN.001 The ABBL ( The Luxembourg Bankers Association) agreed to follow the standard EPC recommendations. They published implementation guidelines in order to provide guidance on the use of the Credit Transfer Initiation Message sent to banks in Luxembourg, and cover SEPA Credit Transfers as well as other Credit Transfers. This documentation can be found on the following page: 2

3 SEPA Direct Debits (SDD) Overview of the domestic Formats Today Luxembourg is supporting 2 domestic direct debit formats besides the SDD. If you are currently initiating collections in Luxembourg, identify which format you use and check how long it will continue to be supported according to the regulations. The validity of formats depend on which of the following three categories they fit in: - Phased out: in scope of the SEPA end date, the format remains accepted for an additional transition period under some conditions. After this period, you must use another format. - Waived: Some formats are granted a waiver, making it possible to continue using them until 1 st February There are no waivers in Luxembourg. - Part of a niche product : Member states can declare a niche product if a product has less than a 10% market share (based on ECB statistics). All niche products will remain valid until 1 st February In Luxembourg, both domestic formats will be phased out: Type Description Validity Continuity DOM-2009 The official direct debit format of the Banking Community (ABBL) in Luxembourg Phased out. Remains accepted until the 31 July 2014 DOM-Allégé This format supports the same scheme, but in a shorter information structure based on an excel file Phased out. Remains accepted until the 31 July 2014 Existing mandates remain valid for SDD Core or B2B 3

4 Comparison of domestic and SEPA direct debits Regarding direct debits, it is particularly important to understand the consequences of switching from one scheme to another. In addition to using a new format, migrating to SEPA also impacts your operational team, and above all your customers. This is why, while designing your migration approach, you must make sure you understand all the related impacts using the comparison table below. DOM- DOM-allégé SDD Core SDD B2B 2009 Format Tag-based Coma separated text file XML XML Alignment of the format with SEPA See New mandatory mandate information in SDD collections SDD Currency Any Currency EUR EUR Frequency Recurrent only Recurrent / One- Off Recurrent / One-Off Eligible All All Business only * Debtor Collection latest sending date (D = payment due date) Mandate management and archiving Refund right Pre- Authorization Pre- Notification D-2 17h30 D-5 (First / Oneoff) D-2 (Recurrent) Debtor s bank Conditional refund right for Consumers within 8 weeks after the date of debit for an authorized transaction***. No refund right for professional users. 13 months for an unauthorized transaction Control of existence of the mandate for each collection Required, but no specification of the time schedule D-1 (all) The creditor holds a paper version and manage the mandate Unconditional refund right within 8 weeks following the date of debit. 13 months for an unauthorized transaction No control of mandate by the Debtor Bank Must be sent 14 days before payment date** No refund right for an authorized transaction. 13 months for an unauthorized transaction Control of mandate authorization by the Debtor Bank Must be sent 14 days before payment date** * In Luxembourg, the microenterprises are considered as businesses, and can therefore be declared Debtors of B2B mandates. ** The pre-notification time can be reduced if agreed between the Debtor and the Creditor. *** According to article 62 of the PSD. 4

5 New mandatory mandate information in SDD collections The Luxembourgish formats contain the main mandatory information regarding SEPA. The major difference concerns the Debtor s Bank BIC: the current format identifies banks with their bank codes in 4 digits. This should be replaced by the usage of the bank s BIC. The date of signing is also a new mandatory attribute required in the SDD collections. Implementation of the PAIN.008 (SDD Collection) The ABBL ( The Luxembourg Bankers Association) agreed to follow the standard recommendations of the EPC. They published implementation guidelines in order to provide guidance on the use of the SEPA Direct Debit Initiation Message to banks in Luxembourg. A company that starts its migration today and uses the local channel New Multiline should implement version PAIN This documentation can be found on the following page: Mandate Migration The Regulation N 260/2012, article 7 Validity of mandates and right to a refund, allows that existing mandates within a legacy direct debit scheme continue to be used within SEPA. Migrating a mandate means that you already have a domestic mandate authorizing you to debit the account of one of your customer and that you will continue using the same mandate, only with SEPA compliant collections. A mandate is considered as migrated when its first related collection in SEPA format has been successfully performed. One of the benefits of the migration is that you can continue to debit your customers with no need for them to re-sign a SEPA mandate. Note that a Creditor has the choice to migrate gradually, and can continue making SDD and DOM-2009 collections simultaneously for different mandates. To migrate your mandates, you should consider the two following major points: Schemes allowed for mandate continuity The existing mandates remain valid for SDD Core or SDD B2B. Whilst the mandates concerning consumers must be migrated to SDD Core, the Creditor has the opportunity to choose to which scheme he would like to migrate the mandates where the Debtor is a business. The existing mandates remain archived in the debtor s bank but after January 2018, it will be the responsibility of the Creditor to prove the existence of a valid mandate in the event of a collection disputed by a Debtor. 5

6 Migration rules The Luxembourgish mandate migration rules have been established by the ABBL and documented on the following web page: (see SEPA - Migration scenario of the national direct debit system to the European SEPA direct debit system). Check also the very complete document DOM2009 to SDD migration principles, information for Creditors (PSU). In Luxembourg, a specific multilateral convention provides authoritative information to any SEPA Direct Debit (SDD) Scheme Participant seeking to join the migration scenario established by the Luxembourg Banking Community. As a creditor, you are thus obliged to sign a specific annex to your SDD contract, provided by your bank, which will ensure your awareness of the migration principles from the LU direct debit system to SDD. Please note that the Creditor Bank must have adhered to the multilateral convention before you initiate SDD collections based on legacy mandates. Make sure it is the case to avoid any rejection. Regarding the migration rules to follow, there are 2 cases which determine the content of the fields in a migration FIRST file: 1. You request a SEPA Creditor Identifier that contains your previous DOM2009 Cetrel Creditor identifier, and you keep your current registration numbers as mandate unique references: Your first collection should contain the following characteristics: - The Sequence Type should be set to FIRST - Field 2.27 "CreditorSchemeIdentification": your new Creditor Identifier. - Field 2.31 "EndToEndIdentification": must be filled with the word "MIGRATION" followed by the reference at the creditor's choice. This field notifies the debtor of the DOM2009 migration. - Field 2.48 "MandateIdentification": This field includes the registration number, which remains unchanged. - Field 2.49 DateOfSignature": " ", this date being defined as the date of signature for all migrated mandate. This is the suggested solution. 2. You do not keep your current registration numbers and/or have not your DOM2009 Creditor identifier included in your SEPA Creditor Identifier: - The Sequence Type should be set to FIRST - Field 2.27 "CreditorSchemeIdentification": your new Creditor Identifier. - Field 2.31 "EndToEndIdentification": must be filled with the word "MIGRATION" followed by the reference at the creditor's choice. This field notifies the debtor of the DOM2009 migration. - Field 2.48 "MandateIdentification": This field includes the new or former registration number. - Field 2.49 DateOfSignature": " ", this date being defined as the date of signature for all migrated mandate. - Field 2.50 "AmendmentIndicator": This field takes the value "true" and is followed by information in field Field 2.51 "AmendmentInformationDetails": This field includes the list of mandate elements which have been modified. Fields 2.52 and 2.53 are mandatory if their value has been modified. - Field 2.52 "OriginalMandateIdentification": This field includes the value of the former mandate unique reference; If the coding is performed via NewMultiline, this latter will automatically place the word "MIGRATION" in front of the former mandate unique reference. - Field 2.53 "OriginalCreditorSchemeIdentification": This field includes your former Creditor-ID (Cetrel or bilateral). For the Creditor, a step prior to migration consists of sending a request to the various banks so that they may confirm the accuracy of the data relating to existing mandates of Debtor clients. 6

7 SEPA Creditor Identifier (CI) To be able to use SEPA direct debit, your first administrative step is to get a SEPA Creditor Identifier. This number will identify you when making collections throughout the SEPA area. How to get a SEPA Creditor Identifier? You can get your SEPA Creditor Identifier via your preferred Luxembourgish bank. Once obtained, it can be used in any SEPA country, for any scheme and for collections through any bank. SEPA Creditor Identifier format The Luxembourgish format is the following: LU27ZZZ Creditor-ID: 26 alphanumerical characters Position 1 and 2: "LU", the ISO country code Position 3 and 4: Check Digit Position 5 to 7: Creditor Business Code, to be chosen by the Creditor (by default: ZZZ) Position 8: Fixed Value 0 Position 9 to 26: National Identifier Mandate information Types of mandate Current Luxembourgish mandates can take various forms such as paper, electronic (via webbanking). Mandate Forms Luxembourg proposes the usage of one of the standard EPC templates. Conversion of BBAN to BIC + IBAN IBAN was adopted as the national account standard for Luxembourg as early as September From October 2005, IBAN became mandatory for domestic credit transfers through LIPS-Net, the former national clearing system in Luxembourg. Consequently, this is no longer an issue. Concerning BIC, a conversion table bank code / BIC is available online: Note that bank codes are stored in the positions 5 to 7 of the IBAN. Example: LU