This will be an important year for Fedwire Funds Service customers. In November 2011, a new message format will be implemented that will allow corporate originators to include extended-character business remittance information within a wire transfer. Although Fedwire and CHIPS® participants will be required to be able to receive extended remittance data from the Fedwire Funds Service or from CHIPS, there currently is no mandate for the Fedwire receiver to report that data to the corporate receiver. In addition, because sending extended remittance data is optional, it is possible that some Fedwire participants might support sending some types of extended remittance data but not others. As a result of this optionality, a set of domestic remittance best practices has been developed to help market participants understand what they need to do to ensure that extended remittance data can flow from end to end.
The new message format is an industrywide change and the result of customer feedback and collaboration among stakeholders at financial institutions, corporations and payments groups. Successful industrywide implementation of the new format will require continued collaboration and consistent communication among financial institutions, originators and beneficiaries.
Effective with the opening of the funds transfer business day for November 21, 2011, the Federal Reserve Banks will implement a new message format to support extended-character business remittance information, better handle cover payments and better align the Fedwire message format with the SWIFT® message format.
To help streamline the transition to the new message format, the Federal Reserve Banks, along with The Clearing House and other industry stakeholders, formed the Wire Transfer Remittance Domestic Best Practices Group. The group’s philosophy is that industry costs will be lower and the likelihood of successful end-to-end processing higher if financial institutions in the funds transfer chain communicate with each other in a consistent, agreed-upon format.
The best practices group developed detailed guidelines to help financial institutions and corporations prepare for the upcoming changes. Best practices were developed for each party in a funds transfer – the originator, the beneficiary, their banks, as well as intermediary banks – as each has a unique and important role in the process (see the Fedwire Funds Transfer Flow diagram below).
At the core of these recommendations is the belief that the new format will be implemented in the most successful and cost-effective way if bank participants communicate with each other in one of three consistent, agreed-upon formats (see the Wire Transfer Extended Remittance Information (ERI) - Domestic Best Practices (PDF) document for details about these “common-denominator” formats). Corporations will still have the flexibility to exchange wire remittance information with their banks in other formats agreed upon bilaterally with their banks. However, originator and beneficiary banks will then need to translate that information to a common-denominator format before exchanging messages with other banks in the funds transfer chain.
The following is a high-level summary of best practices identified by the group:
Additional details about the best practices recommended by the group can be found in the Wire Transfer Extended Remittance Information (ERI) - Domestic Best Practices (PDF) document.
Fedwire Funds Service customers can review background information and guidance on preparing for the new format in our online resource center. Testing and implementation details will be provided by the Federal Reserve Banks in coming months, and ongoing updates will be shared in future FedFocus issues. Sign up to stay informed about upcoming developments related to the new business remittance information message format. If you have additional questions about our Fedwire Service Offerings, contact your account executive.
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“SWIFT” is a trademark of S.W.I.F.T. SCRL.
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