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A step towards ISO 20022 Structured Data

A key advantage of correspondent banking as a global payment system is that it can reach almost any account in the world. Customer experience has also improved in recent years, with payments becoming faster and more transparent thanks to SWIFT gpi, and it is set to continue with their new offerings. However, other improvements are required to keep up with the needs and expectations of payments users, both corporates or individuals: 

  • Compliance and Anti-Money Laundering (AML) processes result in regular delays, particularly where key information is missing from the transaction. SWIFT estimates that some 10% of international payments are held up somewhere along their journey for compliance checks, most of which are false-positives and avoidable investigations. 
  • Beneficiaries have little information to drive automated reconciliation, resulting in costly and inefficient manual processes, as well as reduced visibility on cash flow and cash positions for corporate treasurers. 
  • Common payment scenarios such as Payment on Behalf Of (POBO) are not fully supported, leading to tedious manual workarounds for customers. 
  • Banks have little insight into the business purpose of a payment, which hinders their ability to develop value-added services. 
  • These challenges all stem from a common cause: insufficient or poor quality data. To crack them, data needs to be improved systematically from end-to-end across the correspondent banking system, including banks. We need more, better defined and more granular data, and we need end-to-end consistency to ensure data is not lost or corrupted as it flows through the system.


To understand the depth of the problem, we need to first understand how banks communicate.  
Take football, for example, watching a game of football in the U.S is a very different experience of football in the UK. And even though Americans and Brits share a common, near-identical language, they will never agree on the rules of football. 

It's the same in the world of interbank communication, this is where ISO20022 comes in. Of the 200 or so initiatives already across ISO domains globally, a significant number are in payments. Many of these projects are likely driven by SWIFT’s mandatory migration of payments and related messaging to ISO 20022, and with this move to start in November 2022. It includes Europe with T2/T2S/TIPS consolidation into ESMIG and EBA Clearing Euro1 and STEP1, UK with FPS and BACS moving to New Payment Architecture (NPA) and CHAPS to ISO 20022, the US with FedWire and CHIPS and Payments Canada’s modernization program.  

While for many the move to ISO 20022 is mandatory, there are several benefits to using the standard within payments, and adoption lays the foundation for future efficiencies. 

Firstly, ISO 20022 messages allow a significant amount of data to travel with the payment. Full information on payment parties and on remittance data gives the potential to reduce errors in payment processing, sanctions screening, and reconciliation, thereby increasing automation. 
Where is this golden source of data? PMPG guidelines have clearly focussed on LEI to identify the debtor and creditors' source of identification. 

Based on the Payments Market Practice Guidelines:  

Debtor Identification - The debtor’s legal name and address data should be sourced from the debtor agent’s KYC master records. As the records are to be in line with Wolfberg principles, intermediary banks trust the source. And, if the debtor holds an LEI then Name and Address should match the official LEI database.  

Ultimate Debtor Identification - The debtor agent should recommend to the debtor to source the ultimate debtor information from the LEI database if an LEI is available if the ultimate debtor maintains an LEI that is different from the LEI of the debtor. In other cases, this data field may include brand names (e.g. doing business as info) or other names.  

The creditor and ultimate creditor Identification - Creditor name/ address is difficult to validate in most cases. To mitigate the issue, the debtor agent should request from its customer the legal name, the ISO country code, and the town of residency of the creditor in the credit transfer. 
The principle is the same in case of ultimate creditor identification. 


One common identifier here is LEI. What is LEI? 

A Legal Entity Identifier or LEI Number is a 20-digit unique code defined by the ISO 17442 standard. An LEI number can be issued to companies and individuals who want to conduct financial transactions and trades. 
An LEI code contains information about an organization’s structure and ownership, enhancing transparency.  

A Legal Entity Identifier contains the following information:

  • The official name of the legal entity.
  • The registered address of the legal entity.
  • The country of formation.
  • The codes for the representation of names of countries and their subdivisions.
  • The date of the first LEI assignment.
  • The date of the last update of the LEI information.
  • The date of expiry.

Format of LEI - ISO 17442 defines the minimum that should be included in each unique LEI number as:

  • Characters 1-4 – the prefix used to identify the LOU who issued the LEI code.
  • Characters 5-18 – the entity-specific part of the code issued by the LOU according to ISO 17442.
  • Characters 19-20 – check digits used to verify the LEI.

Who Regulates LEI? 

Several parties are involved in the regulation and adoption of LEI.

  • European Banking Authority (EBA) – issued recommendations on the use of LEI.
  • Financial Stability Board (FSB) – set up at G20 as an international body that monitors and makes recommendations about the global financial system.
  • Financial Conduct Authority – the conduct regulator for 58,000 financial services firms and financial markets in the UK and the prudential regulator for over 18,000 of those firms.
  • Europen Securities and Market Authority (ESMA) – safeguard the stability of the European Union financial system by enhancing the protection of investors and promoting stability.
  • The Legal Entity Identifier Regulatory Oversight Committee (LEI ROC)– a group of 71 public authorities and 19 observers from more than 50 countries established in January 2013 to coordinate and oversee a worldwide framework of LEIs.
  • The Global Legal Entity Identifier Foundation (GLEIF) – responsible for controlling local operating units.
  • Local Operating Unit (LOU) – responsible for issuing and maintaining LEI codes in each region.

The fact that a payment could be mapped several times between MT and MX / vice versa along the payment chain. It is important to understand that the high quality of data can only be guaranteed at the “source of the information” at the origin of a payment transaction to avoid labour, cost-intensive repair and especially to be in line with FATF16 regulations.

Conclusion - Current migration to ISO 20022 is only to the 'unstructured ISO 20022' payment and there is no magic method to achieve ISO 20022 structured data. In order to move from the status quo to the target ISO 20022 state, it is crucial that the financial institutions and banks strongly promote, monitor, and – at a certain stage – enforce structured customer data from their customers/senders.


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Akhil Rao

Akhil Rao


Nth Exception

Member since

18 Dec 2020



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