SEPA Migration Checklist

Dear client,

Single Euro Payments Area (SEPA) standards become mandatory across 17 Euro member states on 1 February 2014. If your organisation initiates Euro ACH payment or direct debits, action needs to be taken to ensure compliance. This email series is intended to provide you with relevant information and practical guidance.

What are SEPA R-Transactions and Reason Codes?

SEPA collections that cannot be processed will require exception handling through the use of R-transactions. In SEPA rulebooks and in ISO XML 20022 there are seven defined exception messages, the so-called R-transactions, because their names all start with an R:

  • Refund
  • Refusal
  • Reject
  • Returns
  • Reversals
  • Request for cancellation
  • Revocation

All of these seven types of R-transactions existed to a degree in most legacy ACH and direct debit schemes, however their treatments were not standardised in each country.
Reason codes are closely related to R-transactions, and if used correctly, they will provide all counterparties with more information on why a particular transaction requires exception handling.
Currently in the market, however, accurate reason codes are not used everywhere and the reason code ‘Not specified reason’  is commonly used. In a number of European countries, appropriate reason codes are sometimes not used because of legal restrictions (e.g. data protection laws) or due to local business practices.
Currently the main reasons for SEPA Credit Transfers observed in the market for reject/returns are:

  • Account identifier invalid (i.e. invalid IBAN or account number does not exist or wrong BIC)
  • Account closed

And the main reasons for SEPA Direct Debits observed in the market today for reject/returns are:

  • Insufficient funds
  • Not specified reason (by debtor bank)
  • This code does not provide sufficient information to creditors to enable them to take remedial actions.
  • Countries such as Austria, Belgium and Germany have data and/or consumer protection laws that restrict banks from providing certain reason codes concerning the financial or alive/deceased status of an account holder.
  • In other markets, bank readiness and ability to differentiate and provide the correct reason code could play a role.

SEPA has the ability to deliver real value to your organisation. Citi is committed to delivering solutions that enable you to capitalise on the benefits that SEPA offers.
To put our expertise to work for you today, please contact your Citi representative or visit our SEPA website at www.transactionservices.citi.com/SEPA where you can also find previous SEPA topics covered in this series.

Upcoming Events

  • EuroFinance Barcelona – Citiís SEPA Breakfast Session with PwC
    Thursday 17th October, 8.00- 9.00 am CET

Join our EuroFinance Breakfast session to hear more about how you can meet the deadline and leverage SEPA to unlock opportunities for your organisation.

Regards,
Treasury and Trade Solutions

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