FSB consults on eliminating cross-border payments friction points

Cross-border payments FSB case study

Global financial systems advisory body the Financial Stability Board (FSB) has called for industry stakeholders to provide case studies that reveal the tangible impact of selected friction points on cross-border payments, particularly with regard to data transfer, and to identify where action should be prioritised to harmonise the cross-border payments system.

The provided case studies will support the FSB in developing recommendations for members that promote the alignment and interoperability of data rules and regulations, or ‘data frameworks’, to support cross-border payments.

These data frameworks include data privacy and operational resilience obligations, AML/CFT compliance, and regulatory and supervisory access requirements for cross-border payments. As well, the FSB will look at the standardisation of messaging formats to support these payments.

The G20, from which the FSB was born, has made it a key priority to increase the speed, cost, transparency and inclusivity of cross-border payments, alongside, it said, upholding the safety and security of data in these transactions.

The latest consultation follows the release FSB’s Stocktake of international data standards relevant to cross-border payments which, after a global survey of members, examined national and regional data frameworks, including state laws and rules, relevant to the functioning, regulation and supervision of cross-border payment arrangements.

Among the Australian respondents to the survey included regulators APRA and AUSTRAC, as well as Government entities the Department of the Treasury, the Attorney-General’s Department, the Digital Transformation Agency and the Office of the Australian Information Commissioner.

The stocktake itself identified a number of friction points across data frameworks that the FSB said “pose significant challenges to improving the cost, speed, transparency and access of cross-border payments”.

Among these friction points include misalignments between jurisdictions’ AML/CTF regulations, particularly with respect to wire transfer recordkeeping, and challenges in implementing FATF guidelines; misalignments in data privacy regulations, including a lack of defined data privacy frameworks in some emerging markets and conflicts between data privacy and AML/CTF regulations; a lack of interoperability of technical standards, including greater need for wholesale ISO 20022 adoption and better standards to improve data portability and cross-border data flows; and a lack of interoperability across data frameworks, including Open Banking, digital identity and real-time payments networks.

Case studies will be sought from stakeholders, including data privacy experts, financial regulators and data protection agencies to support FSB’s development of its data alignment and interoperability objectives, and recommendations to support cross-border payments.

These recommendations will be issued for public consultation in early 2024.