Author: Mark DoughtyHead of Product Design
With the November ISO 20022 deadline fast approaching, financial institutions are actively navigating the complexities of this significant transition. At our recent Sanctions Leaders Roundtable on 14 March, industry experts discussed the real-world impact of the migration, from adoption progress to operational challenges and compliance implications.
ISO 20022 adoption – Where do we stand?
Swift’s latest figures show a 1.1% uptick in MX adoption from January to February, highlighting that there is still a considerable journey ahead to meet the November deadline. They are confident the majority of the top FIs using Swift will meet the migration deadline, and are in dialogue to monitor their forecast.
While cross-border payments are increasingly adopting the ISO 20022 format, many corporate clients still initiate payments in non-ISO formats, leading to necessary translations and potential data quality risks.
Challenges of transitioning to MX messaging
Although the move to MX messaging is widely viewed as positive, banks’ core infrastructure still relies heavily on legacy formats which lack the data structure and granularity. Until these IT systems fully catch up, institutions will need to manage translation challenges that could impact data integrity and screening effectiveness.
Additionally, the introduction of new message types and increased transparency across payment chains means careful assessment is required to determine potential sanctions risk, and whether enhancements to screening are required.
As institutions adjust to the new messages, many are also experiencing an initial spike in blocking rates. There is recognition that decades have been spent optimising screening capabilities, and changing the underlying message structure was bound to cause an impact. This was not unexpected by institutions, who have planned to mitigate the impact whilst their screening technologies settle and techniques, including reapplying historical decisions kick in. We at GSS have worked with the industry experts and developed our Decision Re-Use and Alteration & Re-Submission Detection features to work cross-format.
Sanctions Screening & Data Quality – A double-edged sword?
The shift to ISO 20022 brings enhanced data granularity, providing the potential for more accurate sanctions screening. However, maintaining data integrity across multiple payment hops remains a challenge, particularly given differences in RTGS systems worldwide.
In a world where data is growing exponentially, and security and privacy are paramount, many institutions have invested in Data Quality initiatives in recognition of the importance of data. From a screening perspective, there are key areas of focus, with a couple of examples being the unambiguous identification of a customer through an ID (e.g. the use of LEIs), or payment purpose codes (e.g. “SALA” identifying salary payments), which can lead to more effective and efficient outcomes.
For institutions where a migration programme has phased adoption, there is the inevitable mix of traffic formats which adds further complications. Along with this, correspondents are also on their own migration journeys and further add to the mix. Even as an institution raised their own level of data quality, they are still beholden to the data received from their counterparts, which means we have to work through this all together.
A collective industry effort is needed
One of the key takeaways from our discussion was the need for greater industry collaboration to ensure a smooth transition. While individual banks can adapt their internal processes, the industry as a whole must work together to prevent inefficiencies, misalignment, and repeated compliance challenges.
What comes next?
As adoption accelerates, financial institutions must focus on harmonising ISO 20022 implementations, addressing data truncation issues, and adapting their sanctions screening frameworks. With the coexistence period ending, the industry will need to strike a balance between compliance, operational efficiency, and mitigating unintended disruptions.
GSS was built to help banks navigate exactly these kinds of challenges. Born out of industry collaboration, we are purpose-built to support effective sanctions screening, reduce false positives, and enable scalable, future-ready compliance solutions for the evolving financial landscape.
