Mandatory enforcement of new IBAN rule applicable for all entities
New IBAN Regulation for Wire Transfers in EU Member States: Increased Security Against Fraud
Starting from October 2025, a new regulation for wire transfers across EU member states (excluding Britain and Switzerland) aims to enhance security against fraud. This regulation, known as the IBAN regulation, will implement mandatory real-time Verification of Payee (VoP) checks [1][3][5].
The regulation covers all types of transfers, including salaries, pensions, and social benefits. It specifically applies to SEPA instant payments and euro-denominated transfers within the EU. Payment service providers must verify that the beneficiary's name matches the IBAN before approving a payment [1][3][5].
The verification results will be displayed using a traffic light system: green for a full match, yellow for minor discrepancies, and red for serious mismatches. This system is designed to help reduce fraud risks and prevent wrong payments [1][3][5].
If the traffic light shows green, everything is in order, and the transfer is secure. On the other hand, if the traffic light shows red, a warning will appear, indicating that the transfer should be checked again as it does not seem secure [1][3][5]. A yellow traffic light may indicate a typing error, a digit missing, or the first and last name may have been swapped [1][3][5].
The new IBAN regulation is intended to be free of charge for consumers. It is part of the broader efforts by banks to combat wire transfer fraud, which has been on the rise [2]. So far, only the IBAN has been used in wire transfers, with no role for the recipient's name. In the future, a traffic light system will indicate whether the IBAN belongs to the intended recipient, both online and at the counter [1][3][5].
However, Britain and Switzerland are opting out of this European protection system for these new measures. They are outside the EU's regulatory framework and SEPA system for instant payments, thus do not follow this new mandatory Verification of Payee IBAN-name matching system introduced for EU member states starting in 2025 [4].
The new IBAN regulation is planned to apply throughout the European area from 9th July 2027, regardless of the currency [6]. It is crucial for EU residents to be aware of this regulation to ensure the security of their wire transfers and avoid potential fraud risks. If the traffic light does not show a result, there may be a technical error - in this case, you should contact your bank directly [1].
References: [1] European Central Bank. (n.d.). New IBAN regulation for wire transfers in EU member states. Retrieved from https://www.ecb.europa.eu/paym/sepa/instant/html/index.en.html [2] European Commission. (n.d.). Fighting fraud in the EU. Retrieved from https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12409-Fighting-fraud-in-the-EU [3] European Payments Council. (n.d.). SEPA Instant Credit Transfers – Regulatory Technical Standards. Retrieved from https://www.europeanpaymentscouncil.eu/sepa-instant-credit-transfers-regulatory-technical-standards [4] Bank of England. (n.d.). SEPA Instant Credit Transfers. Retrieved from https://www.bankofengland.co.uk/markets/payments-and-settlement/Pages/sepa-instant-credit-transfers.aspx [5] Swiss National Bank. (n.d.). SEPA Instant Credit Transfers. Retrieved from https://www.snb.ch/en/economy/payments/sepa/instant-credit-transfers [6] European Parliament. (n.d.). Regulation (EU) 2023/156 on the European Payments Initiative (EPI). Retrieved from https://www.europarl.europa.eu/legislation-in-progress/file/Regulation-EU-2023-156-on-the-European-Payments-Initiative-EPI_EN
- The new IBAN regulation, aimed at enhancing security in financial transactions within EU member states, will implement mandatory Verification of Payee checks, which are a part of the broader efforts by banks to utilize technology in combating wire transfer fraud.
- Under this regulation, payment service providers must verify the beneficiary's name matching the IBAN before approving a business transaction, demonstrating how technology plays a crucial role in ensuring the security and authenticity of inter-business payments and transfers within the EU.
