Report to the Congress on the Use of the ACH System and Other Payment Mechanisms for

16 Pages·2017·0.39 MB·English

by  Federal Reserve Board

Report to the Congress on the Use
of the ACH System and Other
Payment Mechanisms for
Remittance Transfers to Foreign
Countries
April 2017
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

Report to the Congress on the Use
of the ACH System and Other
Payment Mechanisms for
Remittance Transfers to Foreign
Countries
April 2017
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
ThisandotherFederalReserveBoardreportsandpublicationsareavailableonlineat
www.federalreserve.gov/publications/default.htm.
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orcontact:
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iii
Contents
Introduction
...............................................................................................................................1
Developments
............................................................................................................................3
Cross-BorderPaymentImprovements .........................................................................................3
ChangesinRulesandRegulationsRelatedtoCross-BorderPayments ..........................................4
EconomicSanctionsandAnti-MoneyLaundering .........................................................................5
Adoption Rates
.........................................................................................................................7

1
Introduction
Section1073(b)of theDodd-FrankWallStreet includeinitsreportananalysisof adoptionratesof
ReformandConsumerProtectionAct(Dodd-Frank internationalACHtransactions(IATs),rules,and
Act)requirestheBoardof Governorsof theFederal formats;theefficacyof increasingadoptionrates;
ReserveSystem(theBoard)toprovidebiennial andpotentialrecommendationstoincreaseadop-
reportstotheCongressovera10-yearperiodregard- tion.Pursuanttothisstatutoryrequirement,the
ingtheBoard’sworkwiththeFederalReserveBanks Boardisissuingthisfourthbiennialreport.2
(ReserveBanks)andtheU.S.Departmentof the
Treasury(Treasury)toexpandtheuseof theauto-
consumerlocatedintheUnitedStates—toaconsumerorbusi-
matedclearinghouse(ACH)systemandotherpay-
nessinaforeigncountry.12U.S.C.5601(a).
mentmechanismsforremittancetransferstoforeign 2 TheBoardconsultedwiththeReserveBanksandtheTreasury
countries.1Section1073(b)requirestheBoardto todevelopthisreport.Thelastreportwaspublishedin
May2015.SeeBoardofGovernors,ReporttotheCongresson
theUseoftheACHSystemandOtherPaymentMechanismsfor
1 Pub.L.No.111-203,124Stat.2065(2010).Section1073(b)of RemittanceTransferstoForeignCountries(Washington:Board
theDodd-FrankActiscodifiedas12U.S.C.5601(b).Aremit- ofGovernors,May2015),www.federalreserve.gov/publications/
tancetransferisanelectronictransferoffunds—requestedbya other-reports/files/ACH_report_201505.pdf.

3
Developments
Thissectionhighlightskeydevelopmentssincethe cross-borderpaymentsaspartof theoverallpay-
Board’sthirdbiennialreportin2015,including mentsimprovementeffort.Inparticular,inJanu-
updatesoncross-borderpaymentimprovements, ary2016,thetaskforcepublisheditsFasterPay-
changestolawsandregulationspertainingtocross- mentsEffectivenessCriteria(effectivenesscriteria),
borderpayments,andissuesrelatingtoeconomic whichoutlinesdesirableattributesof futurefaster
sanctionsandanti-moneylaundering(AML) paymentcapabilities,includingacriteriononcross-
requirements. borderfunctionality.Specifically,thetaskforce
believeditwasimportantthatcapabilitiesshould
“…enableconvenient,cost-effective,timely,secure
Cross-Border Payment Improvements
andlegalpaymentstoandfromothercountries.”5In
early2016,thetaskforcesolicitedproposalsfor
Overthepasttwoyearssincethe2015report,there fasterpaymentsolutionsthatsoughttoaddressthe
havebeenseveraleffortsunderwaytoimprove effectivenesscriteria.Twenty-twoproposalswere
cross-borderpayments.AsnotedintheBoard’s2015 submitted,andsomeof thosepartiesresponding
report,theFederalReservepublishedStrategiesfor withsubmissionsmayelecttohavetheirproposals
ImprovingtheU.S.PaymentSystem(Strategies releasedtothepublic,alongwithanassessment
Paper)inJanuary2015,whichoutlinedfivedesired againsttheeffectivenesscriteria,inparttwoof the
outcomesforconsumerandbusinesspayments, taskforce’sfinalreportinmid-2017.6Beyondthe
coveringspeed,security,efficiency,international proposalssubmittedthroughthetaskforceprocess,
(cross-borderpayments),andcollaboration.The thetaskforcebelievedthat,byhighlightingcross-
paperrecognizedtheneedforenhancementsto borderfunctionalityasadesiredattributeinitseffec-
cross-borderpayments,particularly“[b]etterchoices tivenesscriteria,itcouldencouragefurtherdevelop-
forU.S.consumersandbusinessestosendand mentof cross-borderenhancementsinthepayments
receiveconvenient,cost-effectiveandtimelycross- market.
borderpayments.”3Severalof thestrategiesoutlined
inthepapercouldresultinimprovementstocross- TheStrategiesPaperalsoincludedastrategyrelated
borderpayments.Oneof thestrategieswastheestab- topaymentsefficiency,includingefficiencyincross-
lishmentof aFasterPaymentsTaskForce(task borderpayments.Aspartof thiseffort,in
force),whichhasthemissionof identifyingeffective March2016theReserveBanksandTheClearing
approachesforimplementingasafe,ubiquitous, House(TCH)announcedthattheyplannedto
fasterpaymentscapabilityintheUnitedStates.4The implementtheISO20022paymentformatstandard
taskforcerecognizedearlyontheimportanceof fortheirdomesticandcross-borderwirepayments
3 FederalReserveSystem(2015),“StrategiesforImprovingthe providers,andotherindustrysegmentssuchasindustrytrade
U.S.PaymentSystem,”(Washington:BoardofGovernorsand organizationsandregulators.
FederalReserveSystem,January2015),2,https:// 5 FasterPaymentsTaskForce,FasterPaymentsEffectivenessCri-
fedpaymentsimprovement.org/wp-content/uploads/strategies- teria,(FederalReserveBanks,January2016),9,https://
improving-us-payment-system.pdf. fedpaymentsimprovement.org/wp-content/uploads/fptf-
4 FederalReserveSystem(2015),“StrategiesforImprovingthe payment-criteria.pdf.
U.S.PaymentSystem,”(Washington:BoardofGovernorsand 6 Partoneofthetaskforce’sfinalreportprovidedbackground
FederalReserveSystem,January2015),3,https:// onitsworkandmotivationforpursuingfasterpaymentssolu-
fedpaymentsimprovement.org/wp-content/uploads/strategies- tionsinthecontextofthecurrentpaymentslandscape.See
improving-us-payment-system.pdf.Thetaskforceiscomprised FasterPaymentsTaskForce,TheU.S.PathtoFasterPayments,
ofrepresentativesfromthefollowingmarketsegments:large FinalReportPartOne:TheFasterPaymentsTaskForce
financialinstitutions,mediumfinancialinstitutions,small Approach,(FasterPaymentsTaskForce,January2017),https://
financialinstitutions,government(operationsnotregulator), fedpaymentsimprovement.org/wp-content/uploads/path-to-
businessend-users,consumerinterestorganizations,non-bank faster-payments.pdf.
4 ReportonRemittanceTransferstoForeignCountries
systems,FedwireFundsServiceandtheClearing ferredunaltered.10Thisimprovestransparencyand
HouseInterbankPaymentsSystem(CHIPS),respec- traceabilityof cross-borderpayments,whichhas
tively.TheISO20022standardhelpscross-border beendifficultinthepast.Insupportof thegpiinitia-
paymentefficiencybyprovidingastructuredformat tive,theReserveBanksandTCHarealsosupporting
forremittanceinformation.7Thisstructuredformat amarketpracticeforFedwireFundsServicepartici-
canfacilitatecross-borderpaymentsbystreamlining pantsandCHIPSparticipantsthatareusingthe
theexchangeof paymentsinformationacrosspay- SWIFTgpiservicetocarrygpi-relatedinformation
mentsystemsthathaveadoptedtheISO20022stan- inrespectivewiremessageformats.11
dardinvariouscountries.TheReserveBanksand
TCHwillcoordinateonamulti-yearadoptionplan. Asdescribedinthe2015report,theReserveBanks
Whilebothannouncedapreliminaryimplementa- offeraninternationalACHservice,calledFedG-
tionapproachandtimelinein2016,detailedplan- lobal®ACHPayments(FedGlobal).12FedGlobal
ningisunderwaytorefinetheimplementationstrat- facilitatesremittancetransfersandothercross-
egy,whichwillbeannouncedtotheindustrywhen borderpaymentstoanumberof countries.In
complete. December2015,theFederalReserveannouncedits
decisiontodiscontinuetheFedGlobalACH
SWIFT’sglobalpaymentsinnovation(gpi)initiative, Account-to-Receiver(A2R)service.TheA2Rfunc-
whichwasannouncedinDecember2015,isanother tionwasoriginallyimplementedin2010forremit-
effortfocusedonimprovingthespeedandtranspar- tancetransactionstoLatinAmericancountries,
encyof cross-borderpaymentsinwire-transfersys- allowingforfinancialinstitutitions“…tosendpay-
tems.8Domestically,anumberof U.S.banksarepar- mentsfromtheircustomerstounbankedreceivers
ticipatingintheinitiative.SWIFTidentifiedfour abroad.”13Successfulfinancialinclusioneffortsin
areasforimprovementincorrespondentbanking MexicoandlimitedreachtodestinationsinLatin
thatitseekstoaddressthroughthegpiinitiative— Americacontributedtoalackof consumerdemand
same-dayavailabilityof funds,transparencyof fees, fortheserviceoption,limitingitsoverallbenefitin
paymentstracking,andtransferablepaymentinfor- themarketandsupportingitsdiscontinuation.
mation.9Akeyinnovationof theinitiative,launched
inearly2017,isthegpiTrackerfeature,whichpro-
Changes in Rules and Regulations
videsinstitutionsanend-to-endviewof thestatusof
theirpayments,suchasconfirmationwhenthepay- Related to Cross-Border Payments
mentgetscreditedtothereceiver’saccountandvis-
ibilitythatremittanceinformationhasbeentrans- In2016and2017,NACHATheElectronicPayments
Association(NACHA)madeandproposedvarious
modificationstoitsOperatingRulesastheyrelateto
cross-borderpayments.14In2016,NACHAimple-
7 ISO20022isthestandardforfinancialmessagingcreatedby mentedatechnicalchangetorecord-formattingrules
theInternationalOrganizationforStandardization.See“ISO thathelpstoensurethatasending(domesticorfor-
20022Universalfinancialindustrymessagescheme,”
www.iso20022.org/.
TheISO20022paymentformatstandardisalsobeingconsid-
10SeeSWIFT,“MajorGlobalTransactionBanksareLivewith
eredforthedomesticretailACHsystem.AttheSeptem-
SWIFTgpi,”pressrelease,February16,2017,www.swift.com/
ber2016SibosCommunitySession,itwasannouncedthatthe
news-events/press-releases/major-global-transaction-banks-are-
ACHeffortiscurrentlyfocusedonintegrationandmappingto
live-with-swift-gpi.
ISO20022,ratherthanafullconversionofACHformats;see
Sibos,“TheRoadtoAdoptionofISO20022intheUnited 11SeeSWIFT,“USPaymentMarketInfrastructuresAgreeto
States,”lastmodifiedSeptember27,2016,https:// SupportSWIFTgpiTrackingofCross-BorderPayments,”
fedpaymentsimprovement.org/wp-content/uploads/092716- pressrelease,March13,2017,www.swift.com/news-events/
road-iso-adoption-usa.pdf.AlsoseeFederalReserveFinancial press-releases/us-payment-market-infrastructures-agree-to-
Services,“TheFederalReserveismakingstridestoadopt support-swift-gpi-tracking-of-cross-border-payments.
ISO®20022intheU.S.,”lastmodifiedMarch2016,www 12SeeBoardofGovernors,ReporttotheCongressontheUseof
.frbservices.org/fedfocus/archive_perspective/perspective_0316_ theACHSystemandOtherPaymentMechanismsforRemit-
01.html. tanceTransferstoForeignCountries,(Washington:Boardof
8 SWIFTisaninternationalcooperativeofferingglobalstan- Governors,May2015),4,www.federalreserve.gov/publications/
dardizedfinancialmessagingservices.SeeSWIFT,www.swift other-reports/files/ACH_report_201505.pdf.
.com/about-us. 13SeeFederalReserveBankofAtlanta,“AmericasCenter:
9 SeeSWIFT,“SWIFTAnnouncesGlobalPaymentsInnovation AnnualReview,”www.frbatlanta.org/americascenter/
Initiative,”pressrelease,December10,2015,www.swift.com/ annualreview/2010/highlights-english.aspx.
insights/press-releases/swift-announces-global-payments- 14See“MinorRulesTopics,”NACHA,lastmodifiedAugust18,
innovation-initiative. 2016,www.nacha.org/rules/minor-rules-topics.