In Could 2023, a gaggle of paytech representatives referred to as on legislators to make sure a good enjoying discipline for all fintech suppliers and their obligations to performing buyer due diligence (CDD) because the EU anti-money laundering regulation was mentioned. Eight months later, the identical teams have referred to as on legislators to make clear the compromise textual content reached on recital 34 of the AML Regulation within the technical trilogues.

The organisations on the lookout for this clarification are the European Third Occasion Suppliers Affiliation (ETPPA), the European Fintech Affiliation (EFA), the Digital Cash Affiliation (EMA) and the European Fee Establishments Federation (EPIF). There are fears that European fee initiation companies (PIS) might be in danger with out additional clarification of recital 34.

Based on the organisations, recital 34 must be additional clarified in two essential respects. They’ve stated that this may be finished inside the realm of the already current political settlement. In any other case, it will likely be
not possible for European PISPs to compete with different fee options reminiscent of card acquirers (Visa/Mastercard), ApplePay and Preferrred/EPI, all of whom must carry out due diligence solely on the service provider to whom they supply companies.

Clarification required

The corporations identified {that a} consumer of PIS by no means has an account or steadiness with the PISP, however the PISP merely initiates a fee from the consumer’s current checking account. That is just like how playing cards, ApplePay, GooglePay, Preferrred/EPI, and so on. work. In all of those instances, the acquirer, i.e. the supplier of the service to the service provider has an obligation to carry out CDD on their buyer, the service provider, however by no means on the payer.

It’s the understanding of the corporations that the intention of Recital 34 has at all times been to make clear {that a} PISP’s CDD obligations are vis-a-vis the service provider solely, not the payer, i.e to permit European PISPs to compete on a degree enjoying discipline. They clarify that the compromise’s wording nevertheless will not be clear about this and leaves room for numerous interpretations, together with one the place additionally the payer might come into the scope of CDD if the payer makes use of the companies of a PISP a number of instances.

To be clear, payers by no means get into the CDD scope of e.g a card acquirer, independently of what number of instances they use such companies or what quantities they pay. This may be clarified on the technical degree, particularly, provided that Article 15 has already been amended to make clear that PISPs’ CDD obligations in relation to occasional transactions are vis-a-vis the service provider, not the payer.

The identical clarification ought to be made with regard to the institution of a enterprise relationship, to make clear that additionally right here, such relationship is simply established vis-a-vis the service provider (not the payer).

Not discriminating PIS assortment

The second concern raised by the organisations pertains to the fully new proposed final sentence of Recital 34. It seems to be discriminating PIS towards playing cards and all different fee sorts when combining it with amassing the funds on behalf of the payee, i.e. service provider.

Of their view, Recital 34 ought to slightly make clear {that a} amassing PSP has to carry out its related CDD obligations, impartial of whether or not the PSP offers PIS per se or not; within the case a PSP additionally offers PIS, the CDD obligation of the PSP is in direction of the service provider, each for the availability of PIS and the availability of fee assortment, as was urged by the Parliament.

All of the corporations are assured that this subject might be addressed on the technical degree provided that the present wording of the Recital will not be aligned with the remainder of the AML framework, which has a fee amassing PSP performing CDD on the payee/service provider, and seems outright discriminatory.

An pressing matter

If the most recent draft compromise textual content for recital 34 turns into regulation, there can be an excessive detriment for PIS, Europe’s home-grown fee resolution.

As such, ETPPA, EMA, EPIF, EFA and OFA name on the European co-legislators to make sure in AMLR technical trilogues that Recital 34 of the AML Regulation makes it 100 per cent clear that merchant-facing PISPs ought to carry out CDD on the payee solely, each by way of the institution of a buyer relationship and for infrequent transactions, and irrespective of whether or not they contact payee (service provider) funds or not.