As the financial industry shifts towards the ISO 20022 standard for payment messages, we at Elucidate are at the forefront of leveraging this advancement to enhance payment security. ISO 20022 offers richer, more structured data, and greater detail in payment processing. This transition marks a significant leap forward in standardizing data exchange, and we have developed a sophisticated system that enables banks to include supplementary data with a payment risk score in their ISO 20022 messages. Unlike the old MT103 format, the ISO20022 MX format is advantageous for our risk scoring because it allows for detailed and structured data, enhancing our ability to perform precise and comprehensive risk assessments.
Overview of ISO 20022 and the Role of Supplementary Data
ISO 20022 has established itself as a crucial standard for financial messaging, enabling structured and efficient data exchange between financial institutions globally. The XML-based format allows for the standardization of data and the inclusion of comprehensive supplementary data alongside basic transaction details. This supplementary data enhances each transaction with additional context, such as payment reasons, detailed party information, and compliance-related indicators, making it invaluable for nuanced data analysis and risk assessment.
How Supplementary Data Enhances Financial Messaging
Supplementary data within ISO 20022 messages allows for a richer dataset to be communicated with each transaction. This data is key to providing deeper insights and supporting the detailed analysis necessary for effective risk management and regulatory compliance. It ensures that every transaction is traceable, thoroughly documented, and understood in its full context.
More details on ISO 20022 messages can be found in their official documentation.
Elucidate’s Real-Time Risk Scoring
At Elucidate, we developed a robust system that can work as a standalone offering or integrate seamlessly with ISO 20022 messaging. When processing ISO 20022 formatted transactions, our platform evaluates the enriched data to assign an immediate risk score, based on direct financial details and contextual information from the supplementary data. The system then enriches the payment messages with a real-time risk score.
Data Collection and Analysis
We aggregate vast amounts of data from multiple sources, including transaction histories, customer profiles, and external risk indicators. Our advanced algorithms and machine learning models analyze this data to assess the risk associated with each payment transaction. We consider various factors, such as the origin and destination of funds, transaction amounts, and patterns that may indicate fraudulent activity. This comprehensive data collection and analysis form the backbone of our real-time risk scoring system.
Generating the Risk Score
Once the data is analyzed, our system assigns a real-time risk score to each payment transaction. This score quantifies the risk level, with higher scores indicating higher risk. Our scoring model is continuously refined and updated to adapt to new threats and evolving regulatory requirements. This dynamic approach ensures that our risk assessments remain accurate and relevant in changing financial crime landscapes.
Including the Risk Score in ISO 20022 Messages
We have designed our system to embed the risk score within the supplementary data fields of ISO 20022 messages. This process involves several steps:
Payment Initiation: When a payment is initiated, the bank's system sends the payment details to our platform for risk assessment.
Real-Time Risk Assessment: We analyze payment data in real-time and generate a risk score.
Message Enrichment: The risk score is then included in the ISO20022 message using the <SplmtryData> element. Here’s an example of how this looks in pain.001 message:
<Document xmlns="urn:iso:std:iso:20022:tech:xsd:pain.001.001.03">
<CstmrCdtTrfInitn>
<GrpHdr>
<MsgId>20240524AB123</MsgId>
<CreDtTm>2024-05-24T09:00:00</CreDtTm>
<NbOfTxs>1</NbOfTxs>
<CtrlSum>1000.00</CtrlSum>
<InitgPty>
<Nm>ABC Corp</Nm>
</InitgPty>
</GrpHdr>
<PmtInf>
<PmtInfId>20240524AB123PI1</PmtInfId>
<PmtMtd>TRF</PmtMtd>
<BtchBookg>false</BtchBookg>
<NbOfTxs>1</NbOfTxs>
<CtrlSum>1000.00</CtrlSum>
<PmtTpInf>
<InstrPrty>NORM</InstrPrty>
</PmtTpInf>
<ReqdExctnDt>2024-05-24</ReqdExctnDt>
<Dbtr>
<Nm>ABC Corp</Nm>
</Dbtr>
<DbtrAcct>
<Id>
<IBAN>DE89370400440532013000</IBAN>
</Id>
</DbtrAcct>
<DbtrAgt>
<FinInstnId>
<BIC>DEUTDEFF</BIC>
</FinInstnId>
</DbtrAgt>
<CdtTrfTxInf>
<PmtId>
<EndToEndId>E2E20240524AB123</EndToEndId>
</PmtId>
<Amt>
<InstdAmt Ccy="EUR">1000.00</InstdAmt>
</Amt>
<CdtrAgt>
<FinInstnId>
<BIC>DEUTDEFF500</BIC>
</FinInstnId>
</CdtrAgt>
<Cdtr>
<Nm>XYZ Inc</Nm>
</Cdtr>
<CdtrAcct>
<Id>
<IBAN>DE89370400440532013001</IBAN>
</Id>
</CdtrAcct>
<RmtInf>
<Ustrd>Invoice 12345 for services rendered</Ustrd>
</RmtInf>
<!-- Supplementary Data for transaction risk score -->
<SplmtryData>
<Envlp>
<Any>
<ElucidateRiskAnalysis>
<RiskScore>75</RiskScore>
<RiskLevel>High</RiskLevel>
<AuditDocumentURL>https://elucidate.co/audit/E2E20240524AB123</AuditDocumentURL>
</ElucidateRiskAnalysis>
</Any>
</Envlp>
</SplmtryData>
</CdtTrfTxInf>
</PmtInf>
</CstmrCdtTrfInitn>
</Document>
Benefits
Strategic value in incorporating a transaction risk score into payment messages
Precision in Risk Assessment: The additional details provided in the supplementary data allow for more precise risk analysis, capturing nuances that might be missed in less descriptive data formats.
Enhanced Compliance Monitoring:
With more detailed transaction data, compliance with stringent financial regulations becomes more straightforward, as the necessary information for audits and reports is readily available and verifiable.
Data-Driven Decision-Making: The enriched dataset supports better-informed decision-making by providing a comprehensive basis for evaluating the security and appropriateness of each transaction.
Audit Trail: Including risk scores in payment messages creates a detailed audit trail, helping banks demonstrate compliance during audits and regulatory reviews. The URL to the audit document provides direct access to detailed validation records, enhancing transparency and accountability.
End-to-end Scoring: Similar to the end-to-end ID, the risk score can travel with the payment throughout the transaction process. This allows other financial institutions involved in the transaction to access and rely on the same consistent risk assessment. By providing a transparent and unified risk score, our system enhances collaboration and trust between institutions, streamlines compliance efforts, and reduces the likelihood of fraud slipping through the cracks at any point in the payment chain. This continuity in risk evaluation ultimately contributes to a more secure and efficient financial ecosystem.
Technical advantages of ISO 20022 integration
Integrating ISO 20022's supplementary data into Elucidate’s risk-scoring system has significantly advanced our ability to evaluate transaction risks accurately. This technical integration ensures financial institutions can leverage detailed transaction data for enhanced risk management. As financial messaging standards evolve, Elucidate remains committed to utilizing sophisticated data analysis techniques to provide our clients with reliable and effective risk assessment tools. This commitment supports our broader goal of enhancing transaction security and operational efficiency in the financial sector.
At Elucidate, we are committed to pioneering a new standard of security and compliance in the financial industry. Our real-time risk scoring system, integrated seamlessly with ISO 20022 messaging, represents a significant step in transforming payment processing. Join us in pioneering a new standard of data and compliance and ensuring your bank stays ahead of potential threats with our cutting-edge technology.
