Federal Reserve Banks and The Clearing House Issue Specifications for New Cover Payments Message Format
October 20, 2008
Circular No. 12012

The Federal Reserve Banks and The Clearing House have announced that they have each completed and distributed specifications for banks to maintain compatibility with the SWIFT enhanced message format when transmitting cover payments through the Fedwire® Funds Service and CHIPS®, the nation's U.S. wire transfer systems.

The enhanced Fedwire, CHIPS and SWIFT message formats are designed to help banks comply with these standards by ensuring enhanced transparency for cover payments. Frequently used in international correspondent banking transactions, cover payments pass through a chain of correspondent banks to settle a credit transfer message that travels a separate route to the ultimate beneficiary's bank. However, current messaging standards do not ensure full transparency of the ultimate originator and beneficiary involved in the transaction. As a result, the current cover payment process could expose intermediary banks involved in the transaction to an increased risk of unknowingly facilitating illicit activities.

Banks are expected to start testing the new format in the May/June 2009 timeframe in anticipation of the November 2009 deadline. Both the Federal Reserve Banks and The Clearing House have been working with banks and operators to develop specifications to permit business remittance information to be included with Fedwire and CHIPS payments by the fourth quarter of 2010.

See the press release for full details.

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