How to comply with EU Payments Regulation
If your business provides transfer of funds services within the EU then you're known as a 'Payment Service Provider'. You're covered by the EU Payments Regulation and the Transfer of Funds Regulations.
The EU Payments Regulation sets out rules about the information on the payer that must be sent with transfers of funds. The aim of these rules is to prevent, detect and investigate money laundering and terrorist financing.
If your business is a Money Service Business, it must comply with the Money Laundering Regulations. By complying with these regulations you'll already be meeting some of the requirements of the EU Payments Regulation.
This guide tells you about the EU Payments Regulation, who it applies to and what you need to do to comply with it. It also tells you about the penalties for not complying with it.
On this page:
- What is the EU Payments Regulation?
- Who does the EU Payments Regulation apply to?
- What to do with the Complete Information on the Payer
- How the EU Payments Regulation links in with Money Laundering Regulations
- Penalties for not complying with the EU Payments Regulation
- Contacting HMRC
What is the EU Payments Regulation?
The EU Payments Regulation came into effect on 1 January 2007. It sets out rules for the information about the payer - the person transferring the funds - that has to be sent with a 'transfer of funds'. A transfer of funds is any transfer that the payer makes through a Payment Service Provider to make funds available for collection at a Payment Service Provider if at any stage in the process the money is moved electronically, for example by fax or email.
The payer can transfer funds from one bank account to another, or they can give the funds they want to transfer to the Payment Service Provider in cash, by cheque or by credit card. The funds can then be transferred electronically using SWIFT (Society for World-wide Interbank Financial Telecommunications) or transmitted in another way.
When a Payment Service Provider transfers funds they must normally send 'Complete Information on the Payer' with the transfer. This allows the authorities to trace payments if necessary
If the Payment Service Providers used by the payer and the person receiving the funds are both within the EU then, unless full details are requested, the sender need only give the account number of the payer or another unique identifier selected by the Payment Service Provider.
Who does the EU Payments Regulation apply to?
If you're a Money Service Business operating as a Payment Service Provider in the EU, you must comply with the EU Payments Regulation rules when you transfer funds. The rules apply to all transfers of funds in any currency that you send or receive.
What to do with the Complete Information on the Payer
When you make or receive any transfer of funds you
must have Complete Information on the Payer (the payer is the person
transferring the funds).
This means:
- the name of the payer
- the payer's address - or their date and place of birth
- either their customer identification number, which is provided by the payment service provider, or a national identity number (which is usually their passport number)
- the payer's account number or a unique identifier which allows the transaction to be traced back to them
In some instances you will also need to verify this information (see below for when you need to do this). You verify the information using documents, data or information from a reliable and independent source such as:
- a passport
- a photocard driving licence
- documents issued by a government department
One-off transfers of under 1,000 euros
If the transfer is a one-off payment and you think it is unlikely to become regular business you do not need to verify the information the payer gives you.
One-off transfers of 1,000 euros or more
For one-off transfers of 1,000 euros or more you must verify the Complete Information on the Payer before you make the transfer.
Linked transactions
If the amount of the funds to be transferred is less than 1,000 euros you'll still need to verify the Complete Information on the Payer if both of the following apply:
- there are several transactions which appear to be linked
- the linked transactions, when added together, exceed 1,000 euros or the equivalent in another currency
Regular transfers - business relationship
If you will be handling transfers for a payer on a regular basis and you develop a 'business relationship' you'll need to verify the Complete Information on the Payer.
When you have verified the information once you don't have to do so for every transaction. Instead you'll need to verify it at regular intervals. How frequently you do it is up to you as it will depend on your assessment of the risk.
Further information on how to verify someone's identity
You can find out more about verifying a person's identity in Section 8 and Appendix 5 of the HM Revenue & Customs (HMRC) leaflet MLR8 'Preventing money laundering and terrorist financing'.
Download MLR8, 'Preventing money laundering and terrorist financing' (PDF 652K)
Ensure that Complete Information on the Payer is sent with the transfer
If you're acting as Payment Service Provider for the payer and you're transferring funds outside the EU you must send the Complete Information on the Payer to the Payment Service Provider acting for the person receiving the funds - the payee.
If the payee's Payment Service Provider is within the EU, you'll only need to send either the account number or a unique identifier which allows the transfer to be traced back to the payer.
If you're acting as Payment Service Provider for the payee you must make sure you receive the Complete Information on the Payer from the payer's Payment Service Provider. If you don't you should ask for it or consider rejecting the transfer.
If you deal regularly with a Payment Service Provider who fails to send the Complete Information on the Payer, you could consider warning them or setting deadlines to make sure you receive it. If they still fail to send the Complete Information on the Payer, you might decide to restrict or end your business relationship with them.
Missing or incomplete Complete Information on the Payer might be an indication that the transfer of funds is suspicious and should be reported to the Serious Organised Crime Agency.
Find out how to report a suspicious transfer of funds
Record keeping
You must keep all your Complete Information on the Payer records for five years
If you're an Intermediary Payment Service Provider you must make sure you keep with the transfer all the information you received with it.
(You're an Intermediary Payment Service Provider if you're involved in the transfer of funds but you're neither the payer's nor the payee's Payment Service Provider.)
How the EU Payments Regulation links in with Money Laundering Regulations
Some people have to apply for what's known as a 'fit and proper' test
before their business can be registered under the Money Laundering Regulations.
If you keep failing to comply with the EU Payments Regulation you may
no longer be accepted as a fit and proper person and HMRC may cancel
your registration. You can find out more about the fit and proper test
by following the link below.
More about applying for the fit and proper test
You can get more detailed information about your responsibilities under the EU Payments Regulation and the Money Laundering Regulations in Appendix 8 of the HMRC leaflet MLR8, 'Preventing money laundering and terrorist financing'.
You can read the full text of the EU Payments Regulation on the Europa website.
Download MLR8, 'Preventing money laundering and terrorist financing' (PDF 652K)
Read the full text of the EU Payments Regulation on the Europa website (Opens new window)
Penalties for not complying with the EU Payments Regulation
The Transfer of Funds Regulations came into effect on 15 December 2007. These give HMRC the power to charge a penalty if a business fails to comply with the EU Payments Regulation.
When HMRC visits your business to check that you're complying with the Money Laundering Regulations they'll also check that you're complying with the EU Payments Regulation.
Appeals, penalties and Money Laundering Regulations
Contacting HMRC
If you need more information on the EU Payments Regulation, or you have any queries about how to comply with it, you can contact the HMRC National Advice Service on Tel 0845 010 9000 (open from 8.00 am to 8.00 pm, Monday to Friday except bank holidays).
If you want to put your query in writing you can contact HMRC by email.
Email HMRC for advice on the EU Payments Regulation
Or if you prefer you can write to them at:
HMRC National Advice Service
Written Enquiries Section
Alexander House
Victoria Avenue
Southend-on-sea
Essex
SS99 1BD
