ISO Messaging Standard and Payment Quality Enhancements

ISO20022 is a universal financial industry messaging standard developed by the International Organisation for Standardisation (ISO). It standardises financial messages, enhancing data quality and content, interoperability, and efficient processing. For more details, refer to the official ISO website.

The ISO20022 messaging standard is a universal financial industry message scheme. From a customer's perspective, it simplifies how you send payments in different currencies to various schemes across all banks and service providers. It eliminates the inconsistency of bank-, bank-group-, and community-based payment initiation standards, paving the way for more unified and seamless payment processing.

Moreover, ISO20022 enhances financial communications' global efficiency, transparency, and speed. It allows for transmitting detailed, structured, and meaningful data, promoting system interoperability. Reducing data discrepancies leads to fewer errors and supports compliance with regulatory requirements.

Hence, implementing ISO20022 offers you a more streamlined, reliable, and compliant payment processing method.

Systems must be updated or configured to use the new versions of payment initiation messages. These changes should be implemented within the transition period set from 1 July 2023 to 31 October 2023. Consulting with your IT team or provider for a detailed plan. For technical specifics, refer to our Connect specification.

The new ISO20022 messages offer the capability of sending additional payment details and have modifications in the XSD structure. The changes in specific messages are as follows:

• pain.001.001.03 upgrades to pain.001.001.09;
• pain.008.001.02 upgrades to pain.008.001.08;
• pain.002.001.03 upgrades to pain.002.001.10.

For a detailed comparison, refer to our Connect specification.

The transition to the new ISO20022 messaging standard starts in July 2023 and concludes by 31 October, 2023. During this period, both the old and new messaging standards will be supported.

If you don't transition to the new ISO20022 standard by the deadline, you risk disruptions to your payment processing. Non-compliance with the new standard could result in an inability to process payments altogether. We encourage you to meet the transition deadline to ensure smooth and continuous payment processing.

Customers are obliged to provide additional data with all payment orders in accordance with the standards set out on the LHV Connect specification website. You must implement these changes before 1 January 2024 to ensure compliance.

LHV's data quality improvements refer to measures aimed at enhancing the accuracy, completeness, and compliance of the payment data we process. These quality improvements are necessary for adhering to regulatory obligations, reducing manual processing, and ensuring efficient and secure transactions.

The data quality improvements enable smoother transactions, with fewer delays due to manual interventions or requests for additional information. It also enhances traceability and supports regulatory compliance, benefiting your company and customers.

These improvements are part of our commitment to maintaining the highest regulatory compliance and customer service standards. Better data quality will enable faster and more secure payments, help avoid potential issues or delays in transaction processing, and contribute to overall customer satisfaction.

Ensuring the data quality of your payments largely depends on the completeness and accuracy of the information you provide with each transaction. While mandatory data is dictated by law and is technically set in the XML message (as described in the Connect specification), it's your responsibility to provide complete and correct payer and payee information, including names, addresses, and account details, if available.

Some transactions may require additional data, such as a business code, customer code, or document number. These are PSP business-specific and depend on how and what data you collect about your customers.

Quality data not only ensures smoother transactions but also aids in maintaining compliance with regulatory requirements. Maintaining data quality also involves regular reviews and updates to customer data. Please note that providing more comprehensive data might result in more efficient payment processing and fewer requests for additional information.

The Data Quality and Requests for Information Processing Annex is a key update detailing three new Service Level Agreements (SLAs) from LHV. It specifies timelines for customers to respond to requests for additional information and introduces new obligations concerning data quality and Requests for Information processing.

These changes help maintain the high level of service you expect from LHV while adapting to evolving regulatory requirements and industry best practices. They aim to:

• Comply with Legal Provisions: Adjustments to our SLAs ensure we meet regulatory expectations
• Improve Payment Data Quality: The changes enhance the accuracy and efficiency of payment data, reducing transaction errors.
• Streamline Information Requests: Clear timelines for responses facilitate smoother communication and quick issue resolution.

The new Service Level Agreements (SLAs) introduce specific, adjusted timelines for customers to respond to requests for additional information from LHV. These timelines are now as follows:

• Data Quality (Payment or VIBAN): 28 days
• Screening: 7 days
• Monitoring: 7 days

The essential change here is the reduced response times for Screening and Monitoring requests, which now must be met within 7 days. As always, customers are required to cooperate by providing any requested information or documents promptly, which may include information about their clients. We acknowledge that investigations sometimes take more time. If such instances occur, we ask you to keep us informed.

These obligations will be enforced from 31 July 2023.

The updated Data Quality and Requests for Information Processing Annexe obliges customers to provide additional data with all payment orders from 1 January 2024 in accordance with the standards set out on the LHV Connect specification website.

In response to these changes, we advise the following actions:

• Review the Updated Annex: Understand the SLA changes and revised RFI response timelines.
• Assess Your Current Processes: Consider how these changes may impact your current processes and make necessary adjustments to meet the new requirements.
• Review Use Cases: Described in our API Specification PSP Payment Use Cases
• Reach out for Questions or Clarification: Contact your Relationship Manager or our customer service team for any queries.

Adherence to these obligations and data quality requirements is vital for ensuring a seamless banking relationship and efficient payment processing. Should there be failure to meet these obligations or provide the necessary additional data for payment processing, there can be several repercussions:

• Payment disruptions: Missing or incomplete data may impact the efficiency and reliability of your payment processing, leading to transaction delays or issues that require additional review or action.
• Increased administrative tasks: Failure to provide necessary data could result in increased administrative work for your company as well as for the bank as we seek to gather the required information.
• Potential termination of contract: In persistent cases of non-compliance, LHV retains the right to terminate the contract with a 60-day notice.

The specific information required varies depending on your payment processing activities with LHV. We ask that you review our API specification and confirm the accuracy of our assessment within the timeline specified by your Relationship Manager. Here are three typical scenarios:

• Scenario #1: For customers currently processing payments via LHV, we request that you review our API specifications and confirm our understanding of your processing profile.
• Scenario #2: For customers not yet processing payments but might do so in the future, we encourage you to familiarise yourself with the API specification. Although immediate action may not be necessary, understanding these specifications can be beneficial for future interactions.
• Scenario #3: For customers only doing non-nested payouts via vIBANs (Use case 4), you are already providing the necessary information, so no immediate action is required. However, we would like to remind you of the additional requirements should you decide to process other types of payments in the future.

The goal is to ensure the quality and integrity of data, streamline the information exchange, and facilitate a smoother, more efficient payment process for all parties involved.

These regulations are crucial in enhancing the traceability of payment transactions and combatting financial crimes.

• EU Funds Transfer Regulation 2015 (FTR 2015): This regulation centres on the following aspects:
  • It seeks to prevent, detect, and investigate money laundering and terrorist financing.
  • Financial institutions must ensure that funds transfers are accompanied by specific information on the payer and the payee.
• The Money Laundering and Transfer of Funds (Information) (Amendment) (EU Exit) Regulations 2019: This is a UK statutory instrument which:
  • Amends EU legislation related to money laundering and fund transfers.
  • Ensures the effectiveness of these regulations in UK law following Brexit.
  • Maintains the requirement of complete information on the payer and payee for fund transfers.

While these regulations require more detailed payment information, your privacy and transaction security aren't compromised. LHV Bank complies fully with GDPR and other applicable privacy laws, ensuring all data is handled securely.

These regulations require more detailed information for each transaction, thus enhancing traceability. They aim to combat money laundering and terrorist financing. Non-compliance could lead to payment delays or rejections.

LHV Bank is committed to ensuring that all data is handled securely and in full compliance with GDPR and other applicable privacy laws. While these regulations require more detailed payment information, they do not compromise privacy or transaction security. Please find the LHV Bank's privacy policy.