PURPOSE OF THE NEW REQUIREMENT - STRONGER SECURITY AND FRAUD PREVENTION
The name and account number verification is an additional layer of payment security. It ensures that before authorizing a transaction, the payer receives an instant notification about whether the name matches the account number. The process is designed to be nearly instantaneous, taking no more than five seconds. Its main goal is to reduce fraud and human error, particularly in cases where scammers alter invoice details while keeping the correct company or individual name visible.
HOW IT WORKS
The verification takes place before payment authorization, performed automatically by the payment service provider (bank or fintech). It involves:
- Checking the entered IBAN against the recipient's name or company name;
- Allowing use of additional identifiers such as the VAT number or Legal Entity Identifier (LEI);
- Conducting the check before every payment, even when sending multiple transfers to the same recipient.
What's important to keep in mind is that the verification does not automatically block a payment. If the system reports a mismatch, the payer still decides whether to proceed.
Each EU country's financial institutions can choose their preferred verification service provider. In Latvia, for example, the central bank has developed a system called "Instant Check", which also serves other European providers. Similar systems are being rolled out across Europe to enable cross-border compatibility, meaning that verification will work even when transferring funds between banks in different EU countries.
The new rule covers:
- Intra-bank payments (within the same bank);
- Inter-bank payments (between different banks); and
- Instant payments.
It does not apply in cases where the payer does not personally provide the recipient's details, such as automated transfers using data retrieved from verified registries.
For companies, this verification adds a crucial safety net, particularly when paying new suppliers or large invoices. It minimizes the risk of sending funds to fraudulent accounts and supports a more transparent payment environment.
