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EU cross-border payment fraud rules go live - Industry roundup: 3 January

Rules to combat EU cross-border payment fraud come into force

New transparency rules designed to help EU member states crack down on Value-Added Tax (VAT) fraud came into force on 1 January 2024. The rules will provide the tax administration of the EU member states with payment information, allowing them to detect VAT fraud more easily, with a particular focus on e-commerce, which is particularly prone to VAT non-compliance and fraud. This creates holes in the tax revenues that pay for vital public services. For example, some online sellers with no physical presence in an EU member state sell goods and services to EU consumers without registering for VAT anywhere in the EU or declaring less than their online sales' actual value. Member states therefore need strengthened tools to detect and shut down this unlawful behaviour.

The new system harnesses the key role played by payment service providers (PSPs) such as banks, e-money institutions, payment institutions and post office giro services, which collectively handle over 90% of online purchases in the EU. As a result of the new rules, PSPs have to monitor the payees of cross-border payments and, as of 1 April 2024, transmit information on those who receive more than 25 cross-border payments per quarter to the administrations of EU member states. This information will then be centralised in a new European database developed by the European Commission, the Central Electronic System of Payment information (CESOP), where it will be stored, aggregated and cross-checked with other data.

All information in CESOP will then be made available to member states via Eurofisc, the EU's network of anti-VAT fraud specialists launched in 2010. This should make it easier for member states to analyse data and identify online sellers who do not comply with VAT obligations, including businesses not in the EU. Eurofisc liaison officials are also empowered to take appropriate action at the national level, such as proceeding with requests for information, audits, or deregistration of VAT numbers. Similar provisions are already in place in some member states and in other countries and have had a tangible effect in tackling fraud in the e-commerce sector.

“These new rules will play a crucial role in the fight against VAT fraud, which costs EU governments billions in lost revenues every year,” commented Paolo Gentiloni, Commissioner for Economy. “By harnessing the information collected by payment service providers such as banks and credit card companies, anti-fraud specialists in member states will be able to more easily and accurately pinpoint and crack down on fraudulent behaviour in the e-commerce sector.”


Citi social trade loan to support financial inclusion in Guatemala

Citi has structured a social trade loan in local currency to Fundación Génesis Empresarial, a private microfinance institution in Guatemala that provides working capital and financial solutions to promote sustainable growth in underserved communities.

Génesis Empresarial will use the funds to extend productive credits to low-income people and entrepreneurs’ owners of microenterprises across Guatemala to finance activities linked to the local economy, thereby promoting inclusive economic growth in the country.

The transaction is aligned with the Citi Social Finance Framework under the access to essential services financial inclusion category. It furthers the bank’s commitment to improving access to financial services in emerging economies. The transaction will have special emphasis on promoting financial inclusion and helps Citi’s goal to support 15 million people around the world, 10 million of them women, by 2025.

“This is the first loan that funds local social finance business activity in Latin America from our trade platform,” said Andre Carvalho, Citi’s Managing Director, Global Head Working Capital Loans & Trade Head for LATAM. “It demonstrates Citi’s capacity to adapt its foreign trade and working capital products to help our clients reach their sustainability and social goals, with a direct impact on Latin American and Caribbean communities.”


SAP updates financial reporting and receivables financing practices for 2024

SAP has announced updates to its reporting and receivables financing practices, which came into effect on 1 January 2024. The updates see the inclusion of share-based compensation (SBC) expenses in non-IFRS results and excluding gains/losses from equity investments, mainly driven by SAPPHIRE Ventures, from non-IFRS results. Also covered are the general shift of gains/losses, even on more minor divestitures to non-operating income/expense, and the discontinuation of the company’s receivables financing programme (SAP triggered financing).

The updates will be reflected for the first time in SAP’s Q1 2024 results, which will be reported on 22 April 2024. While the updates will not impact Q4/FY 2023 results, which will be reported 24 January, they will be reflected in SAP’s outlook for 2024 and potential updates to its Financial Ambition 2025.

“By implementing these updates, we hope to further increase the transparency of our operating results, while at the same time reducing short-term noise and volatility,“ said Dominik Asam, CFO and member of the Executive Board of SAP. “Including share-based compensation in our adjusted earnings may be interpreted as a disadvantage in comparison with some of our peers. But we believe recognising share-based compensation as a genuine expense of running a business is long overdue. We are also convinced that appropriately reflecting it in steering and the incentivisation of management will ultimately add economic value.”

Reflecting the company’s increasing focus on cross- and upselling its broader cloud solution portfolio, SAP also announced its intent to replace the current “SAP S/4HANA Cloud” revenue and current cloud backlog disclosure with a more broadly defined “Cloud ERP Suite” revenue disclosure in 2024.


Azorra selects Salmon Treasurer for financial operations

Salmon Software, a provider of treasury management solutions, has signed a new contract with Azorra, a relationship-driven aircraft lessor. The agreement will see Azorra use the Salmon Treasurer TMS for its financial operations.

The TMS is marketed for its robust functionality, user-friendly interface, and features designed to streamline treasury processes, enhance reporting, and optimise financial decision-making. Azorra’s decision to partner with Salmon Software underscores its commitment to leveraging technology to drive efficiency and transparency in its treasury operations.

Implementing Salmon Treasurer should enable Azorra to centralise and automate its treasury processes, providing real-time visibility into cash positions, forecasting, loan management, and reporting. Salmon Software aims to deliver a tailored solution that aligns with Azorra’s strategic financial objectives.

“As we continue to expand our business, welcome new airline customers and acquire an increasing number of aircraft, our investment in Salmon Treasurer will empower us to quickly make informed decisions and drive efficiency, thanks to detailed visibility of our financial operations,” commented Alan Stanford, Chief Financial Officer at Azorra.


HSBC completes sale of French retail banking business

Further to its announcements on 18 June 2021 and 14 June 2023, HSBC Continental Europe (HBCE) has completed the sale of its retail banking business in France to CCF, a subsidiary of My Money Group.

All necessary regulatory approvals were obtained, and the transaction was completed on 1 January 2024.

“This represents an important milestone in our strategic vision for Europe,” said Noel Quinn, Group CEO, HSBC. “I am delighted with this positive start to 2024 - our team in Europe will continue with the aim of becoming the leading international wholesale bank in Europe, complemented by a targeted Wealth and Private Banking business.”


ABN Amro invests in SET Ventures to accelerate a net zero energy system

ABN Amro is investing in SET Fund IV, a fund focused on data and digital technology companies that help accelerate the energy transition to a zero-carbon society. The fund is managed by SET Ventures, an investment company that provides growth capital to innovative enterprises, enabling them to become successful market leaders. For ABN Amro Corporate Investments, this is the third climate-related fund investment.

This investment aligns with ABN Amro’s climate strategy, which was announced at the end of 2022. The bank’s climate strategy is critical in building momentum to accelerate the transition to a net-zero economy by 2050. ABN Amro is investing €1bn in startup capital through direct investments, fund investments and hybrid capital deals to finance this transition. At the same time, the investment should boost the knowledge and network available for the bank’s current activities around the energy and digital transition.

“This investment is a way for ABN Amro to provide capital to young, fast-growing companies that are helping the economy to transition to sustainability, but do not yet qualify for credit lines and other bank products,” said Floris Lyppens, Managing Director of ABN Amro Corporate Investments.


MAS penalises Credit Suisse for misconduct by its relationship managers

The Monetary Authority of Singapore (MAS) has imposed a civil penalty of $3.9m on Credit Suisse AG (Credit Suisse), for its failure to prevent or detect misconduct by its relationship managers (RMs) in the Singapore branch. The RMs had provided clients with inaccurate or incomplete post-trade disclosures, resulting in clients being charged spreads above bilaterally agreed rates for 39 over-the-counter (OTC) bond transactions.

When Credit Suisse executes OTC transactions requested by its clients, it charges a spread over the price obtained from the relevant interbank counterparties. For the 39 transactions, the RMs had, in contravention of sections 201(c) and 201(d) of the Securities and Futures Act 2001 (SFA):

  • Made false statements to their clients regarding the executed interbank prices and/or spreads charged; and/or
  • Omitted material information that the spreads charged were above the agreed rates.

This enforcement action on Credit Suisse follows MAS’ review of pricing and disclosure practices in the private banking industry. Investigations revealed that the bank had failed to implement adequate controls, such as post-trade monitoring, to prevent or detect the RMs’ misconduct. Credit Suisse has since strengthened its internal controls to prevent the recurrence of such misconduct. The bank has admitted liability under section 236C of the SFA for failing to prevent or detect the misconduct by its RMs and paid MAS the civil penalty. As part of the civil penalty settlement, Credit Suisse has also separately compensated its affected clients.

“Financial institutions should implement robust governance frameworks and processes to ensure fair and transparent pricing to their customers,” commented Ho Hern Shin, Deputy Managing Director (Financial Supervision), MAS. “We will continue to engage the banks to improve their controls in this area and will not hesitate to take firm enforcement action against financial institutions found to have breached our laws.”


Finacity facilitates MXN1bn securitisation for Laboratorios Sanfer

Finacity Corporation (Finacity) has successfully launched a trade receivables securitisation for Laboratorios Sanfer, S.A. de C.V. (Sanfer). The transaction amount is MXN1bn, it has a five-year tenor and is being funded by a Mexican bank.  

Sanfer is the largest Mexican private market pharmaceutical company founded in 1941 under the premise of utmost respect for patents and trademarks. Sanfer manufactures branded pharmaceutical products and leverages its brand and reputation to promote its branded generic pharmaceutical portfolio to over 8,000 points of sale, including physicians and pharmacies, driving demand for its products. 

Sanfer’s business has flourished through its internal infrastructure, an ability to acquire innovative and ever-changing products and licenses based on the needs of its target markets. Sanfer has operations in 26 countries in Latin America, including Mexico, Colombia, Peru, Chile and Argentina. 

The new securitisation transaction includes most of the trade receivables originated by Sanfer in Mexico. Finacity acted as the structuring agent, providing structuring and execution support and is responsible for ongoing program administration and reporting.


HMV selects omnichannel payments solution to aid European expansion

Iconic UK music and entertainment retailer HMV has selected Worldpay Omnichannel, developed by Worldpay from FIS and FreedomPay, to help support its expansion plans in Europe. 

Through a single integration, Worldpay Omnichannel allows merchants to operate across borders and point of sale (POS) providers, supporting global and local card schemes alongside local payment methods. The solution covers many of consumer’s preferred payment methods and enables merchants to deliver a more consistent omnichannel experience across the retail landscape.

The solution should allow for synchronisation and tokenisation across multiple channels, enabling merchants to operate more efficiently and innovate to better meet shoppers’ expectations and changing payment habits. The solution also enables access to multiple POS providers, allowing merchants to maintain their preferred relationships with partner ecosystems while supporting simpler and faster implementation through a single integration.

Worldpay Omnichannel is live in HMV’s Dublin and Antwerp stores and will be rolled out across Europe in the coming months.

“We needed a solution that would enable us to provide our customers with a seamless journey across multiple channels, as well as bring us into new markets simply and efficiently,” said Darren Houghton, Head of IT at HMV. “Worldpay is a trusted partner that understands our business. Our new capabilities will speed our ability to innovate and better help our customers as we expand across Europe.”


RMB up to fourth most active global payments currency

Swift’s RMB Tracker has shown that in November 2023, the RMB overtook the Japanese yen as the fourth most active currency for global payments by value, with a share of 4.61%. Overall, RMB payment value increased by 34.87% compared to October 2023, while in general, all payment currencies increased by 5.35%. Regarding international payments, excluding payments within the Eurozone, the RMB ranked fifth with a share of 3.15% in November.

The tracker uses data from live and delivered MT 103 and MT 202 - customer-initiated and institutional payments - and ISO equivalent messages exchanged on Swift. RMB’s fourth place out of all international currencies in November saw it behind the US dollar (47.08% of all global payments value), the euro (22.95%), and the British pound (7.15%).

As a global currency in the trade finance market, based on live and delivered inter-group only MT 400 and MT 700 messages exchanged on SWIFT, RMB ranked second based on value, accounting for 5.70% of November’s trade finance transactions, overtaking the euro (5.61%). This field remains dominated by the US dollar (83.97%).

Regarding FX spot transactions, RMB was November’s fifth most used currency for FX confirmations, moving back ahead of the Canadian dollar. The US dollar was the most used, followed by the euro, pound and yen. In terms of the top economies carrying out FX spot transactions in RMB, the UK came out on top in November (37.55%), followed by the US (14.76%), Hong Kong (10.54%), France (8.57%) and China (6.04%).

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