Effective bank customers required to follow newly imposed IBAN regulations - what's the commencement date?
Starting on October 9, 2025, the European Union will implement a new traffic light system as part of the Verification of Payee (VoP) regulation, aimed at enhancing the security of wire transfers by verifying that the recipient's name matches the International Bank Account Number (IBAN) before payment approval[1].
The system works via a visual traffic light model indicating the result of this name-IBAN verification:
- Green light: The recipient's name and IBAN fully match, signaling the transfer is safe to proceed without concern.
- Yellow light: Minor mismatches detected (e.g., slight spelling errors or punctuation issues). Payments can still proceed but at the sender's own risk.
- Red light: A serious mismatch exists between the recipient name and IBAN, indicating a high risk of fraud or error. Although senders may still proceed, they assume full responsibility if the funds are lost and unrecoverable[1].
This requirement for mandatory name-IBAN checks applies broadly to all types of payments, including salaries, pensions, rent, social benefits, and other financial transactions across EU member states[1]. The aim is to reduce wire transfer fraud and incorrect payments by alerting senders proactively when beneficiary details do not align correctly, thereby preventing funds from being sent to the wrong or fraudulent accounts.
In summary, the traffic light system promotes safer wire transfers by providing a clear, user-friendly interface that layers an essential fraud-prevention check into the payment process. It offers individuals, businesses, and institutions greater confidence and protection in their bank transactions within Europe[1].
- A "Yellow light" suggests a possible typing error, a missing digit, or a mix-up of first and last names.
- The UK and Switzerland have announced they will not adopt the IBAN regulation, meaning transfers to these countries will not have the extra protection.
- In the future, the traffic light system will indicate whether the IBAN belongs to the intended recipient, both online and at the counter.
- Consumers have been increasingly becoming victims of wire transfer fraud, which can involve fake invoices, manipulated account data, or various scams. This new system is expected to make it harder for fraudsters to use false IBANs for wire transfer fraud.
[1] Source: European Central Bank (ECB) - [Link to the official statement]
- In the new traffic light system implemented by the European Union on October 9, 2025, a yellow light suggests that minor discrepancies, such as typing errors or mix-ups of first and last names, have been detected during the mandatory name-IBAN checks, indicating that payments can still proceed but at the sender's own risk.
- The traffic light system, which applies to all types of payments across EU member states, is aimed at reducing wire transfer fraud and incorrect payments by providing a clear, user-friendly interface that offers individuals, businesses, and institutions greater financial security and protection within Europe.
