SEPA Name check

Anyone making a credit transfer (or direct debit) in the SEPA area enters the name of the recipient (or payer), but this is not matched by the bank. Simple transposed numbers are effectively prevented by the IBAN check digit. However, if fraudsters send a forged invoice to a victim, for example, the recipient’s name cannot be checked when the transfer is made. The SEPA name check should change this in the future.

What is the SEPA name check?

In November 2022, the European Commission presented a draft for the regulation of SEPA real-time payments, which, among other things, should enable the payer to check the name of the payee. The payer enters the IBAN and the name of the recipient and receives – before he initiates the payment – information as to whether the IBAN exists and is listed under this name.
In addition, the payer should be able to initiate the payment even if the check does not show a match. Some experts believe that such a regulation is also imminent for the conventional SEPA Credit Transfers (SCT).

Right, almost right, quite wrong or completely wrong?

It is obvious that the correct name of the payee must not simply be disclosed to the payer for reasons of data protection. The payer should not be able to ask for anything that he does not already know himself. It is equally obvious that in the case of names, the different spellings, abbreviations and character sets very quickly lead to a discrepancy. Does “G. Muellér” possibly mean “Gerd Müller”? The payer could be told “almost correct”, but the EU Commission’s draft does not have a guideline for this.

A number of service providers have formed to provide the SEPA banks with suitable IT systems for the SEPA name check and these rely on a graduated feedback.

Who benefits from the SEPA name check?

Ideally (name and IBAN are confirmed), the payer actually benefits from the check. Legal relevance is not regulated in the current draft. If the check is “approximately correct” and the transaction turns out to be fraudulent, the payer has the same legal status as without the check: he must try to reverse the payment via his bank. If this is not successful, the beneficiary’s bank must hand over the contact details of the account holder (upon request). The person who has been defrauded can try to recover his money through criminal proceedings.
For the banks, the SEPA name check initially means an implementation effort in online banking and in the core banking system. Since the name check does not have to be carried out for free, costs can be compensated through fees. Greater savings are conceivable if the processing effort for incorrect transfers is reduced because fewer incorrect transfers occur.

An additional use case for the SEPA name check will arise for companies that currently use an Account Information Service (AIS) in accordance with PSD2 or a 1-cent credit transfer (a confirmation code is then included in the remittance information). These methods can be used to check whether the user also has access to an account or has copied the IBAN somewhere. Requesting account access data from the AIS is often a high hurdle, even for honest customers. The procedure with the 1-cent transfer does not fare much better in terms of acceptance. With the SEPA name check, an “account check light” is created as a side effect.

The two illustrations with transaction examples from a mobile banking app were kindly made available to us by SurePay BV.