Russia pioneers payment standards

Apr 13th 2015 |

Russia’s payments environment is challenging. Strict currency control regulations require anyone making cross-border payments to submit paper documentation explaining the reasons why to the central bank. For companies with complex cross-border structures, this task is onerous. But developments in payment formats are already underway. These could eliminate the currency control paper chase as early as September 2015.

Working groups

Russia’s Corporate-to-Bank Market Practice Group (СMPG), obtained approval from the Common Global Implementation (CGI) group for its rouble payment and statement formats. A working group of ROSSWIFT, Russia’s SWIFT user/member group, proposes new International Organization for Standards (ISO) XML payment message formats for several types of payments. They would be tasked with determining how all the data that needs to be contained in a payments message is represented in XML. The three proposed areas for new formats under consideration are, first, non-rouble payments, second, payments to federal/government authorities (such as tax and customs) and third, currency control.

Currency control

“This third one is the most interesting to me,” says Matthieu de Heering, SWIFT’s head of Russia, CIS & Mongolia. “The Russian CMPG is working [with us] to develop new messages that would eliminate the need for corporates to submit paper documents to banks each time they make a foreign currency payment. There is a local approval process before we move ahead in developing the new message types – which don’t exist yet – and they must then be approved by ISO. This is very interesting because Russia will be championing a format that will benefit the entire international payments community.”

SWIFT and CMPG have established that, for the two first developments, they will need to customise existing formats. For currency control, actual new messages are needed in the payments part of ISO 20022.

The next step will be to determine when CMPG begins work on drafting the currency control message formats. The project could start by end 2014. CMPG must then decide on the formats, which must be approved by the ISO. The payment types could then become available for use by corporates and banks by late 2015.

De Heering confirms that it could mean that companies operating in Russia could be saying farewell to paperheavy central bank reporting. “Assuming we go ahead with the project, corporates with subsidiaries in Russia will be able to handle currency controls in Russia through the XML message developed by CMPG. It’s also documented in English, which is no small matter either. The IT implementation and back-office burdens will be significantly lighter,” he says.

The message format could also be applied to other countries with currency controls and part of the ISO approval process will be to ensure that the format’s specific fields can be adapted for use in other contexts.

Precedent in Finland

The concept of combining a payment message format with other data – such as that required for central bank reporting – has precedents. Three years ago SWIFT worked on messaging formats in Finland. De Heering explains: “We were approached by the Finnish banking community, which said it needed a better way to handle the documents being sent back and forth between tax and customs authorities, the police and banks. The messages were associated with data, for example relating to court orders, but there were frequent delays and problems in processing the messages and the paper documents.” SWIFT assisted them in developing an ISO message type based on XML for the Finnish authorities, which overcame this problem by developing new messages with the key data in an ISO compliant message format. De Heering adds: “It’s a different geographical region, with a different market and different players, but the approach is the same.”

Corporates in Russia may well be happy at the prospect of handling currency controls via a payments message, but de Heering emphasises that improvements in Russian payments have already been achieved. Messaging formats for rouble payments and statements such as payment confirmation messages have been agreed and are already being used by some corporates and banks.

While only four corporates are currently using SWIFT in Russia, these new formats mean that the Russian payments and reporting environment – until now known for complexity – is about to get a lot more friendly.

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