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NICE Actimize: Are Financial Institution Payments Screening Processes Prepared for the SWIFT Switch?

SWIFT (Society for Worldwide Interbank Financial Telecommunication) is transitioning from its current MT messaging standard to an ISO 20022-compliant MX standard based on XML. But what does this mean for financial institutions and are they ready for the payments screening processes to be changed?

Ted Sausen is the Director – AML Subject Matter Expert, at NICE Actimize explains why this transformation is a good thing. NICE Actimize is a provider of financial crime, risk and compliance solutions for regional and global financial institutions, as well as government regulators. The company provides real-time, cross-channel fraud prevention, anti-money laundering detection, and trading surveillance solutions that address such concerns as payment fraud, cyber crime, sanctions monitoring, market abuse, customer due diligence and insider trading.

With his many years of experience in compliance, Sausen told The Fintech Times that 80% of high-value payments by volume and 87% by value will have migrated to ISO 20022 by 2023. Therefore payments companies must adapt to take full advantage of the change:

Ted Sausen, Director - AML Subject Matter Expert, at NICE Actimize
Ted Sausen, Director – AML Subject Matter Expert, at NICE Actimize

Are financial institutions considering a strategic change to their risk screening strategy this coming year? Upcoming standardisation changes implemented by SWIFT (Society for Worldwide Interbank Financial Telecommunication) bode strongly that current risk screening formats may need adjustments to stay compliant and these processes may certainly be under scrutiny.

Starting in November 2022, SWIFT is transitioning from its current MT messaging standard to an ISO 20022-compliant MX standard based on XML. This means that financial institutions need to start reviewing their existing risk screening solutions to ensure that they are ready for these message types and will be able to optimise the benefits that the new changes provide. The benefits of the ISO 20022 standard include richer and better-structured data and less freeform text; more transparency and customer information reducing customer friction; operational efficiencies through improved analytics; and enhanced straight-through processing.

Capitalising on ISO 20022 standards, the upcoming ISO-compliant SWIFT standard for electronic data interchange between financial institutions plans to strengthen financial crime prevention by clearly indicating and simplifying the extraction of rich data from payments messages and improving AML compliance through transaction screening. Better data yields a better result. This adjustment establishes an industry-wide language and standard message format that makes transaction information uniform in structure and transparent in meaning while unifying existing standards by providing interoperability across messaging standards.

What benefits will the new SWIFT MX transformation offer financial institutions? First, the new SWIFT MX messages allow financial institutions to leverage the messages’ uniform structure to strengthen understanding and consistency of incoming payments, drastically improving money laundering screening and detection. Second, the process also helps organisations deliver better customer experiences by identifying and excluding from screening any unnecessary or meaningless information that could result in false-positive alerts and stopped payments.

Right now, more than 10,000 financial institutions worldwide use the current SWIFT MT message standard. However, by late 2025, the MT messaging standard will be retired and replaced by an ISO 20022-compliant MX message standard. SWIFT estimates that 80% of high-value payments by volume and 87% by value will have migrated to ISO 20022 by 2023. Therefore, financial institutions need to be sure that their payments screening technology will effectively take full advantage of both SWIFT MT and ISO 20022-compliant MX transaction message standards to quickly screen transactions and, where applicable, block payments in real-time.

In addition, new self-service screening solutions provide a highly configurable approach to monitoring payments for financial crime and sanctions risks. As part of any transformation process, financial institutions should implement and establish scalability options and self-managed settings that allow easy adoption of new configurations as transaction types diversify and the ISO 20022 standard evolves.

As a financial institution evolves to meet the new standard, it should also look to establish greater control and adopt technology that boosts the speed and accuracy of payments screening. By updating a sanctions screening strategy that grows with the business and as payment volumes and types increase, the financial institution can more confidently address the complexities of payments screening scenarios.

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