8 Big Stories Transforming The Payments Landscape
7. Dodd-Frank 1073: Remittance Challenges Still Loom
The requirements for remittance providers have been relaxed thanks to the recent updates for Dodd-Frank 1073, but that doesn't mean compliance will be a walk in the park.
Despite updates that relaxed some of the original requirements of Section 1073 of the Dodd-Frank Act, which requires greater transparency for remittance providers, many smaller financial institutions are still struggling to prepare for when the law goes into effect later this year.
Some smaller institutions don't even know if the regulation will apply to them, as providers that process fewer than 100 consumer remittance payments a year are exempt from the regulation, says Tony Salamone, Fundtech's senior VP of U.S. payments product management. But many consumer remittances could be made through commercial accounts if, say, the consumer is also a small-business owner, making it hard for banks to record their consumer remittances, Salamone explains.
Many institutions are also faced with the challenge that compliance is largely out of their hands. The rule instructs banks to tell customers the cost of a transaction up front. "The originating bank doesn't control the cost. These transactions are going through correspondent banks, and the originating bank relies on them for the right information," Salamone says.
That information can be hard to get from the correspondent banks, as no central database exists with all of their fee and tax information for remittances, although Salamone says Fundtech is building such a database for its customers with partner correspondent banks.
And banks will need to change their processes for record retention and error resolution to comply with 1073's rules around transaction cancelations, says Karroll Searcy, the director of Viewpointe Association Services, which provides support on compliance for payments players. "The effort will be defining the workflow processes that meet the new requirement, including cancelations and error resolution processes that may be up to 180 days after the transaction." — J.C.