Swift to test real-time cross border payments in Europe

I am curious how banks can use TIPS for global cross-border payments unless they break their SCT adherence agreements with the EPC.

TIPS uses the SCT Inst scheme, and SCT/SCT Inst rules only allow payments which originate from a payment account in the EU.

There was a request last year to the EPC to allow payments originating outside the EU to be forwarded as SCTs within the EU, but this was rejected in their change request consultation.

Typically, a payment sent to a EU beneficiary from outside the EU is sent to a correspondent bank in the EU which then routes it to its final destination through Target2 or perhaps through a bilateral with the beneficiary bank if ones exists. The Target2 RTGS is expensive compared to TIPS and other clearers of SCT Inst (e.g. EBA's RT1) and is not 24/7 or guaranteed real-time.

However, the big issue is that banks typically do not screen intra-EU ("domestic") SCT payments - if the beneficiary bank is unaware a SCT Inst/SCT originated outside the EU, the payment will not be screened as it should be as an international payment creating a financial crime risk.

It requires a rule in the SCT Inst/SCT scheme to identify a SCT as originating outside the EU and mandating the originator data that needs to be included at the right detail in the SCT for beneficiary banks to screen. Beneficiary banks would also need to modify their processing to screen SCT Inst/SCTs that originate outside the EU.

One for the EPC to reconsider?