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Transaction monitoring requirements for payment initiation services (service 7)

Published: 23 January 2024

Question:

Must payment initiation services (service 7) meet the transaction monitoring requirements?

Answer:

Yes, it is important that payment initiation service providers (PISPs) monitor transactions adequately, even if the banks involved have the same obligation. Like a bank, a payment institution fulfils a gatekeeper role and is responsible for monitoring its transactions. Furthermore, a bank only has insight into transactions that involve its own accounts. A PISP, by contrast, has insight into sets of transactions performed through multiple banks, which provides it with an overall view of those banks. As a result, a PISP may be better placed than a single bank to assess whether specific transactions are unusual in the area of money laundering or terrorist financing. A PISP must notify the Financial Intelligence Unit (FIU-NL) of any and all unusual transactions.

There is also a risk of fraud. Under PSD2, banks may block third parties (such as PISPs) from accessing bank accounts if they have evidence that a transaction is fraudulent or unauthorised. Banks must monitor transactions proactively and implement adequate systems that enable them to do so as part of their operational management. Although banks are subject to this obligation, PISPs must also meet the transaction monitoring requirements. For PISPs, transaction monitoring serves as a second defence mechanism in addition to Strong Customer Authentication (SCA) to prevent fraud. This means that transaction monitoring should offer protection against money laundering, terrorist financing and fraud.

Transactions may be monitored in a risk-based manner. For example, a PISP may use peer groups of comparable customers in order to compare its customers' transaction behaviour with that of their peer group. In addition, for low-risk customers or groups of customers, it may decide to lower the frequency or decrease the scope of its transaction monitoring (see the Annex). More information about transaction monitoring can be found in our guidance document on post-event transaction monitoring for payment service providers.

Foreign PISPs that provide cross-border services with a presence in the Netherlands, such as a branch or agent, are also obliged to have an adequate transaction monitoring system in place and perform sanctions screening. Those without such a presence are subject to the anti-money laundering rules of their home Member State.