2017 Wells Fargo FIG Payment Services Handbook. Essential guide to making payments in USD, EURO, YEN, and RMB

Transcription

1 2017 Wells Fargo FIG Payment Services Handbook Essential guide to making payments in USD, EURO, YEN, and RMB

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3 Table of contents Introduction...1 About Wells Fargo s payment products...1 About Wells Fargo...1 Our global presence...1 What s new in payments...2 Payments overview understanding the U.S. dollar, euro, and Japanese yen payment systems...3 USD...3 CHIPS...3 Fedwire...3 Fedwire and CHIPS processing hours...4 ACH...4 Checks...4 Euro...4 TARGET2...4 EBA EURO1...5 Other euro systems...5 STEP1...5 STEP2...5 SEPA (Single Euro Payments Area)...5 Checks... 6 Japanese yen...6 Foreign Exchange Yen Clearing System (FXYCS)... 6 Bank of Japan Financial Network System (BOJ-NET)... 6 Other Japanese yen systems... 6 Zengin system... 6 Check and promissory note clearing... 6 Chinese Renminbi (RMB) Real-Time Gross Settlement System (RTGS)...7 Hong Kong Clearing...7 Cut-Off Times...7 China National Advanced Payment System...7 U.S. government regulations on the processing of your payments...8 Office of Foreign Assets Control...8 Information Reporting and Bank Secrecy Act... 9 USA PATRIOT Act... 9 Dodd-Frank How your payments are processed by Wells Fargo...10 Wells Fargo s payment products...11 USD payment products...11 Commercial payments...11 GlobalPay.USD GlobalPay.Intraday GlobalPay.PreAdvice CyberFile Transfer GlobalPay.File: Bulk File Delivery GlobalPay.FX GlobalPay.FXIQ...12

4 Principal Preservation...12 GlobalPay.PayProtect...12 GlobalPay.OneDeduct...12 Treasury payments TreasuryPay.USD...12 Trade payments...12 Trade.Export Collect...12 TradePay.202Deduct...13 TradePay Euro payment products...13 Commercial payments...13 GlobalPay.Euro...13 GlobalPay.EuroOut...13 Treasury payments...13 TreasuryPay.Euro...13 Trade payments...13 TradePay.Euro 202Deduct...13 TradeEuro.Export Collect...14 TradePay.Euro Yen payment products...14 Commercial payments...14 GlobalPay.Yen...14 Treasury payments...14 TreasuryPay.Yen...14 Trade payments...14 TradePay.Yen 202Deduct...14 Incoming Fee Deduct...14 RMB payment products Commercial and Treasury payments...15 GlobalPay.RMB...15 GlobalPay.FX.RMB...15 Payment orders sent via SWIFT MT Payment orders sent via SWIFT MT USD Payment Reference Guide...18 Fedwire and CHIPS formatting guide...20 Principles for straight-through processing CHIPS and Fedwire payments...20 CHIPS format...21 Fedwire format...21 Fedwire format example...22 International payment formatting guide...22 Formatting overview...22 Four simple principles for straight-through processing for SWIFT...23 IBAN (International Bank Account Number)...24 SWIFT...25

5 Other country clearing codes...26 Other party identifiers...26 Codewords for field 72 (Sender to Receiver information) MT103, MT200, MT202, and MT202COV payment formats...28 Customer transfers MT Bank transfer for your own account MT Bank transfer to other bank beneficiaries MT Cover payments MT202 COV...32 MT202 message for trade transaction requiring charges to be deducted Examples of properly formatted MT103, MT200, and MT202 payments...35 USD examples...35 MT103 Customer transfer OUR...35 MT103 Customer transfer BEN...36 MT103 Customer transfer SHA...37 MT200 Bank transfer for own account...37 MT202 Bank transfer in favor of a third bank trade transaction MT202 COV Bank transfer to cover underlying customer credit transfer MT103 debiting USD account in foreign currency by debiting to USD account Samples of common formatting errors and corrections...40 Customer transfer MT103 payment...40 Bank transfer MT Euro examples...46 MT103 Customer transfers...46 MT202 Bank transfer covering a trade transaction with beneficiary deduct...48 MT202 Bank transfer to be effected via real-time system (TARGET)...48 MT203 Multiple bank transfer...49 Yen examples...50 MT103 Customer transfer BEN...50 MT103 Customer transfer SHA...51 MT103 Customer transfer OUR...51 MT200 Bank transfer for own account...52 MT202 Bank transfer To cover a treasury transaction...52 MT202 COV Bank transfer to cover underlying customer credit transfer...53 MT202 Bank transfer To cover a trade transaction with beneficiary deduct...53 RMB examples...54 Offshore Payments Onshore Payments...55 GlobalPay.FX.RMB...58 Appendix 1 Codeword list for RMB onshore payments (F72) Appendix 2 Format requirement payment orders send via CyberPay...60

6 1 Introduction This handbook has been prepared to facilitate the processing of your global payments in USD, euros, and yen. It provides you with a general overview of the payment systems and a detailed description of how your payments are processed by Wells Fargo. We have also included a guide that provides samples of recommended payment formats for both SWIFT and CyberPay-initiated payments to help ensure seamless processing of your payments through Wells Fargo. About Wells Fargo s payment products Wells Fargo is one of the world s largest international correspondent banks. We offer a full array of services to thousands of correspondent banking customers and corporations around the world. Wells Fargo s USD and global currency suite of services attests to our commitment to this industry and our ability to meet the dynamic needs of our customers around the world. Our payment systems enable our customers to concentrate all of their treasury, commercial, retail, and trade transactions with one correspondent bank. This eliminates the need to use multiple banks based upon the currency or geographic proximity of the beneficiary, as well as the need to send cover payment instructions for each payment request. This process speeds reconcilement, reduces the cost of processing, minimizes funding costs, reduces errors, and makes handling of inquiries easier, since all questions can be directed to one correspondent. About Wells Fargo Wells Fargo serves over 70 million customers, offering a comprehensive array of retail, commercial, investment banking, capital management, and wealth management services. Wells Fargo has one of the largest distribution networks in the United States, offering financial services through more than 8,700 stores and some 12,000 automated teller machines (ATMs). Globally, we have a correspondent network spanning 130 countries. Our global presence encompasses 35+ offices, including nine overseas branches. Our international lines of business include: Correspondent Banking, Trade Services, Outsourcing Services, Foreign Exchange, Asset Management, Capital Markets, Structured Trade Finance, and services for Global Multilateral Institutions. Our global presence Americas Bogota Buenos Aires Charlotte Guayaquil Los Angeles Mexico City Miami New York Philadelphia Santiago Sao Paulo San Francisco Washington, D.C. Winston-Salem Europe Dublin Frankfurt London Madrid Milan Paris Middle East and Africa/India Dubai Istanbul Johannesburg Mumbai** Asia Pacific Bangkok* Beijing Dhaka* Hanoi* Ho Chi Minh City* Hong Kong Jakarta* Kuala Lumpur* Manila* Seoul Shanghai Singapore Sydney* Taipei Tokyo * APAC representative offices ** Mumbai Representative Office includes New Delhi and Chennai sub representative offices

7 2 What s new in payments: Global Payments Innovation Initiative (SWIFT gpi) adopts cloud-based information repository Over 80 banks have joined the SWIFT gpi initiative thus far, representing close to 71% of all cross-border payments. The industry momentum remains strong and further banks are interested in joining this initiative. In response to early adopter feedback SWIFT is creating a cloud based information repository that will be used to store payment status information. The repository will be populated by SWIFT as well as the participating banks. Instead of reporting all payment status changes, banks will only need to report credit to the final beneficiary or any payment execution delays into the repository either via an API or using FIN message. In all other cases, SWIFT can leverage the FIN inform service to populate the repository. SWIFT gpi initiative members will be able to log in to the SWIFT hosted repository via a front end called the Tracker to instantly check the status of the payments they have sent, those in progress and those that have been received. In future, this will also allow other banks to check the payments that have been sent to them, and to update clients on their payments. In addition to payment status information, SWIFT will provide a central service, called the Observer, to track adherence to the gpi SLAs for all initiative members. The Observer will allow banks to pinpoint issues and identify improvement opportunities. The Tracker and Observer will be available to participating banks in The directory of all gpi members and is hosted on SWIFT s central reference data utility, Wells Fargo is excited to be a part of the SWIFT gpi initiative and views it as a corner stone in the evolution of a new correspondent banking model for faster and more transparent cross-border transactions. European regulations on the processing of your payments Wire Transfer Regulation EU2015/847 The European Union s Wire Transfer Regulation EU2015/847 repealed and replaced the previous EU regulation, EU Regulation 1781/2006, on Anti-Money Laundering. The regulation enhances the rules governing funds transfers effective June 26, 2017 for any transactions sent or received via the Union. The regulation impacts MT103 and MT202 COV transactions irrespective of currency that are settled via the EU. The regulation also referred to as the Wire Transfer Regulation, implements the recommendation of Financial Action Task Force (FATF 16), aims to make the abuse of funds transfers for terrorist financing and other financial crime purposes more difficult and enables relevant authorities to fully trace such transfers where necessary to prevent, detect, or investigate money laundering or terrorist financing. Requirement The following information is now mandatory for all banks within the EU: 1) All transactions must contain the originator s name, address,* and account number 2) All transactions must contain the payee s name and account number NB:* If the address is unavailable the sender bank can provide alternate details defined as either: official personal document number or customer identification number or date and place of birth. Intermediary banks must also reasonably ensure that the required information is present in the wire, monitoring, and suspension of transactions with missing information.

8 3 FATF R16 The regulation is similar in many aspects to Financial Action Task Force R16 (FATF 16) which requires the provision of originator and payee name, account number, and address. The key difference is that under FATF R16 these intermediary banks need to take reasonable measures to ensure that originator and beneficiary information is present whilst retaining straight through processing capability. In the European version of this regulation, the payee address is not a requirement at this time; however, payments can be stopped or rejected for lack of sufficient information. The regulatory environment continues to evolve and change and updates on this and other regulations that impact cross border payments will be shared as they occur. Payments overview understanding the USD, euro, and yen payment systems USD The USD payment network within the U.S. consists of four primary payment vehicles: CHIPS (Clearing House Interbank Payment System) Fedwire ACH (Automated Clearing House) Checks The following section gives a brief description of each of these payment methods: CHIPS CHIPS operates a real-time, private-sector payment system owned by banks. CHIPS was established in 1970 by the New York Clearing House Association (now The Clearing House) as an electronic alternative for high-dollar checks that were used for the movement of funds from one bank to another. CHIPS was created to focus on maximizing processing efficiencies, minimizing risk, and allowing participant banks to respond effectively to the ever-changing nature of domestic and international (cross-border) payments. Wells Fargo is one of the early members of CHIPS. CHIPS is a real-time payment system that uses a patented multilateral netting process to settle payments with minimal use of liquidity. The system continually scans its payment database looking for offsetting payments between two or more banks. This process ensures that payments are made efficiently and rapidly. Payments are considered final and settled when released by CHIPS. Neither daylight nor overnight overdrafts are allowed, eliminating any financial risk to CHIPS or its participants. Each CHIPS participant is assigned a four-digit CHIPS Participant Number (often referred to as the CHIPS ABA number), which serves as a bank identifier within CHIPS and in SWIFT messages. In addition, CHIPS participants have the ability to assign a unique Universal Identification Number (UID) for accounts on their books. This six-digit UID is a valuable tool in promoting straight-through processing (STP), since it can be used to uniquely identify bank and corporate customers without the need to provide sensitive account information. Fedwire Fedwire is the electronic, large-value payment system managed by the Federal Reserve Bank of the United States. Fedwire is a real-time gross settlement system (RTGS), meaning all transfers occur in real time, and settlement is immediate and final on the remitting and receiving banks accounts with the Federal Reserve Bank. Wells Fargo is among the largest Fedwire processing banks. Daylight overdrafts are allowed in this network, but such overdrafts are closely monitored and controlled. A charge is assessed based on the amount of the overdraft per minute.

9 4 Every bank in the U.S. that maintains an account with the central bank (The Fed) is assigned an ABA number used to facilitate specific business clearing needs, including high-value payments, securities, ACH, checks, etc. Having an ABA number does not necessarily indicate a bank s eligibility to participate in the high-value payment system known as Fedwire. It is common to have a series of ABA numbers dedicated to support check clearing and ACH, while a separate and distinct ABA is maintained for the purposes of high-value payment (Fedwire). Each ABA consists of nine digits. Wells Fargo kindly asks that you verify that an ABA number is eligible to receive Fedwire payments before making such a request. The link to the Federal Reserve website where you can verify all ABA numbers is the following: fedwiredirectory.frb.org/search.cfm. Fedwire and CHIPS processing hours CHIPS and Fedwire provide extended processing hours to support global cross-border payment processing. Operating hours commence at 21:00 ET on the day prior to value date for both systems. The CHIPS processing ends at 17:00 ET for third-party transactions. Third-party Fedwire processing ends one hour later, at 18:00 ET. Although all banks in the U.S. can participate in the extended processing hours, only a few, very large correspondent banks choose to take advantage of the early opening. Wells Fargo is one of the large financial institutions that participate in the entire processing day. Most large financial institutions choose to join the payment networks in early morning U.S. ET (07:00 08:00). What are the implications of the extended Fedwire and CHIPS hours for you? The extended processing hours in the U.S. complement the working hours in many international markets. The primary driver of extended hours is greater overlap of the U.S. payments systems with overseas markets. In addition to the risk mitigation benefits of the extended day, your beneficiaries will receive earlier posting and notification of the proceeds. ACH ACH is a low-cost, low-value (deferred settlement) payment system. It was originally designed as a replacement for the check processing system in the United States. The ACH system links more than 8,000 financial institutions in the U.S., including commercial banks, savings and loan institutions, and credit unions. Oversight responsibility for the ACH network is provided by the National Automated Clearing House Association (NACHA). NACHA sets guidelines and rules for its participating banks. ACH is a paperless, batch-based, store-and-forward payment system. Settlement is accomplished by debiting and crediting the Federal Reserve accounts of participating financial institutions. ACH is used primarily for low-value, non-time-sensitive payments. Most ACH payments take two days to reach the beneficiary. Examples of ACH payments include pensions, dividends, and direct payroll deposit. Wells Fargo was one of the first banks in the United States to develop and employ an automated interface between SWIFT and ACH using our GlobalPay. File service. Wells Fargo is one of seven banks that have organized its own processing services as an ACH association through the Electronic Payments Network (EPN), formerly known as NYACH. Wells Fargo is one of the largest originators of ACH transactions in the U.S. Checks While use of checks is the most time-consuming of the various payment methods described, it still remains the most popular form of payment in the United States. Euro Wells Fargo is a direct member of the main euro payment systems, TARGET2 and EBA EURO1, allowing us to ensure that your euro payments are effected quickly and efficiently. The following section gives a brief description of each of these payment methods: TARGET2 TARGET2 is the Real-Time Gross Settlement (RTGS) system for transactions in euro. TARGET stands for Trans- European Automated Real-Time Gross Settlement Express Transfers. TARGET2 is the second generation of TARGET. Payment transactions are settled one-by-one on a continuous basis in Central Bank money with immediate finality. There is no upper or lower limit on the value of payments.

10 5 Approximately 1,000 direct and 735 indirect participants and 5,292 correspondents are accessible via TARGET2. TARGET2 is operated by the Eurosystem (the European Central Bank and other EU Central Banks). Being an RTGS system, each payment is processed in real time, and settlement is immediate across the accounts that banks hold with their Central Bank. The system operates using SWIFT and the identification of banks within TARGET2 is through the use of the SWIFT BIC. Wells Fargo Bank, N.A. London branch is a clearing member of TARGET2 via our SWIFT BIC PNBPGB2L. TARGET2 opens at 07:00 Central European Time (CET) and closes at 17:00 CET for customer payments. An additional hour is available at the end of the day for direct participants to square their positions. EBA EUROl EBA EURO1 is a same-day payment system run by the Euro Banking Association (EBA). Launched in 1998, EBA EURO1 was developed in order to provide an efficient, secure, and cost-effective net settlement infrastructure, but with immediate finality for all euro high-value payments processed. Similar to the CHIPS system for USD, EBA EURO performs rolling multilateral netting and settlement throughout the day among its 52 participant banks. Each EBA EURO1 participant only has one single obligation/claim toward the system as a whole. EBA EURO1 is a private-sector-owned system used for domestic and cross-border single payments in euro between banks operating in the European Union. There are 22,203 BICs reachable via the EURO1/STEP1 participants as listed in the EURO1/STEP1 directory. EBA EURO1 is an alternative to TARGET2 similar to TARGET2, it is a SWIFT-based system with banks identified via SWIFT BICs. Although it is a netting system, payments processed via EBA EURO1 are irrevocable and processed with immediate finality. Wells Fargo Bank, N.A. London branch is a direct participant of EBA EURO1 via SWIFT BIC PNBPGB2L and uses EURO1 extensively to effect euro payments both to and from the EU/EEA. EURO1 opens at 07:30 CET and closes at 16:00 CET for payment processing. During the final settlement window, members final positions are sent by EBA Clearing to each member. A member with an end-of-day obligation is to pay to EBA EURO1 for its obligation via TARGET2 and a member with an end-of-day claim receives the claim via TARGET2 from EBA EURO1. The service provides a unique RTGS-equivalent multilateral net settlement arrangement, duly approved by the European Central Bank (ECB). Other euro systems There are other euro payment systems, which are described briefly below. Wells Fargo is not a direct member but, where necessary, can access the systems via a partner to provide you with the services you need. Some of the systems are for intra-eu payments only and relate to various regulations and directives of the European Union to have all intra-eu payments treated as domestic rather than cross-border. STEPl This is effectively the same as EURO1, but members are not able to settle directly. Members of STEP1 have to use a EURO1 member to settle their end-of-day obligations. The membership comprises banks that do not comply with the strict EURO1 admission criteria. On a daily basis, STEP1 processes approximately 20,000 transactions for a total value of more than 1 billion euros. STEP2 This is a pan-european ACH service, run by the EBA Clearing. It is restricted to intra-eu/eea EURO transactions (i.e. SEPA Credit Transfer SCT and SEPA Direct Debit SDD). Wells Fargo is not currently a direct member since our business is largely into or out of the EU/EEA, rather than within the Eurozone.

11 6 SEPA (Single Euro Payments Area) Specifically for euro payments where the accounts of the originator and beneficiary are within the EU (and the expanded European Economic Area EEA and voluntary adopters such as Switzerland), this payment scheme was developed with the intention of replacing all existing national euro ACH systems in Europe. There are several Clearing and Settlement Mechanisms (CSMs) offering banks a service, and this is a further step toward ensuring that payments across Europe can be handled in the same way as domestic (national) transactions. Since this is purely an intra-europe payment service, Wells Fargo is not a direct member, but has access to the process through a partner in order to provide the service to customers where required. Checks There is no pan-european euro check clearing system. Each country has its own national clearing system and, in view of the declared intention to reduce the volume of checks used in Europe, it is unlikely that this will change. Wells Fargo recognizes the need to be able to clear checks across Europe and uses partnership arrangements to be able to offer a pan- European check clearing capability. Japanese yen Wells Fargo is pleased to provide our clients with true value-added JPY payment solutions. We are a direct clearing member of BOJNET and FXYCS for JPY clearing. Foreign Exchange Yen Clearing System (FXYCS) The Foreign Exchange Yen Clearing System (FXYCS) is used to facilitate the clearing of cross-border yen payments. The Japan Banking Association owns and operates FXYCS where it has delegated the operation of the IT systems to the Bank of Japan, and the processing of instruction takes place in the BOJ-NET system. FXYCS handles yen payments resulting from foreign exchange transactions, yen denominated bond transactions, transactions in the EUROYEN market as well as cross-border payments. The system is also used to handle Continuous Linked Settlements (CLS) payments in yen. Wells Fargo is a direct participant of FXYCS. The cut-off times for clearing the commercial payments are set to 13:30 Japan Time (JT), which is 30 minutes before the closure of the FXYCS system. Bank of Japan Financial Network System (BOJ-NET) The BOJ-NET is a Real-Time Gross Settlement System managed and operated by the Bank of Japan. The primary activity of BOJ-NET is the settlement of inter-bank money market transactions, securities transactions, and fund transfers between financial institutions across their accounts with BOJ. Wells Fargo is a participant in the BOJ-NET. The operating hours of the systems are from 09:00 Japan time (JT) to 17:00 (JT) for all participants. Other Japanese yen systems There are two other systems used for effecting payments and clearing checks: Zengin system Zengin is an interbank clearing system for domestic funds transfer, which is operated by Tokyo Bankers Association. The system can support single and bulk payments such as the payment of wages, pensions, dividends and tax refunds, and payments resulting from the inter-regional collection of bills and checks. Wells Fargo does not handle the domestic funds transfer for yen. Bill and Check Clearing System (BCCS) Bills (Promissory Notes, Bills of Exchange) are widely used for commercial transactions between business enterprises. Checks are mainly used for corporate payments in Japan. The Tokyo Clearing House handles the bills that have reached the payment dates and checks are brought to the local clearing house where they are exchanged and settled between banks.

12 7 Chinese Renminbi (RMB) Real-Time Gross Settlement (RTGS) System Wells Fargo is a direct clearing member of RMB RTGS in Hong Kong, enabling the provision of onshore and offshore Chinese renminbi clearing solutions to you. Hong Kong Clearing There are four currencies (described below) that can be cleared through Hong Kong. Wells Fargo participates as a direct participant for the RMB clearing. 1. Hong Kong dollar (HKD) for which the Hong Kong Monetary Authority (HKMA) provides settlement of the currency. Processing is provided through the Hong Kong Interbank Clearing Limited. 2. USD Clearing is built on the same infrastructure as and operated in the same manner as the HKD clearing system. It was launched on August 21, 2000, to provide USD RTGS. The USD Settlement Institution (SI), HSBC, is a commercial bank and USD transactions are settled across the books of the USD SI. 3. EUR Clearing Euro clearing was introduced in 2003 and provides euro RTGS and operates like the USD Clearing. HKMA appointed Standard Chartered Hong Kong Ltd as the SI for the Euro Clearing System in Hong Kong. 4. RMB RTGS System The ability to settle RMB in Hong Kong is a result of the appointment of Bank of China (Hong Kong) (BOCHK) by the Peoples Bank of China (China s Central Bank) as the settlement institution for RMB. The Clearing Bank, BOCHK, maintains a settlement account with the People s Bank of China and is a member of China s National Advanced Payment System (CNAPS) to clear cross-border payments in/out of mainland China. RMB RTGS System, referred to as the RMB Clearing House Automated Transfer System (RMB CHATS) in Hong Kong, can be regarded as a technical extension of CNAPS in mainland China, governed by Hong Kong laws. In addition to the linkage to CNAPS, the RMB CHATS system is also linked to the Shenzhen Financial Settlement System (SZFSS) for RMB cross-border payments between Hong Kong and mainland China. The payment system allows the processing of RMB interbank payments, bulk clearing and settlement of payment items on a multilateral netting basis, and settlement of Payment versus Payment (PvP) and Delivery versus Payment (DvP) via links with other local RTGS systems in Hong Kong. This is similar to the Hong Kong dollar RTGS system. The RMB CHATS therefore facilitates both settlement of onshore (mainland China) and offshore transactions. Cut-Off Times RMB CHATS operates from 08:30 Hong Kong Time (HKT) to 23:30 HKT while CNAPS operates from 09:00 HKT to 16:30 HKT. China National Advanced Payment System Overview The Peoples Bank of China (PBoC) has developed several interbank payment systems, which include the three systems below. These three systems are the primary applications systems of the China National Advanced Payment Systems (CNAPS). CNAPS supports the message exchange and settlement of transactions in cross-border RMB payments. The CNAPS system is available from CNAPS, and operates from 09:00 HKT to 16:30 HKT. High Value Payment System (HVPS) has been in operation since 2005 and mainly handles inter-city and local credit transfers above a given value threshold as well as low value transfers. Payment instructions are sent in real time and cleared transaction by transaction. The HVPS settles cross-border payments between China, Hong Kong, and Macao. The system is available from 08:30 to 17:00 and only operates on business days. Bulk Payment System (BEPS) deals primarily with local and non-local paper-based debit payments as well as low-value credit transfers below a pre-determined value. The system sends payment instructions in bulk, nets in real time, and settles at regular times.

13 8 Internet Banking Payment System (IBPS) was established nationally in 2010, and handles interbank retail payment transactions initiated via internet, enabling customers to submit online payments and obtain results in real time. These are typically debit and credit transactions initiated by commercial banks. Wells Fargo is not a direct member of CNAPS and has access to CNAPS through RMB CHATS participation, which enables the settlement of transactions destined for mainland China beneficiaries. U.S. government regulations on the processing of your payments Because Wells Fargo is a U.S. bank, we are bound by all U.S. government regulations irrespective of where we process transactions. The following information is therefore relevant to all your business with Wells Fargo, whether processed in the United States, Taipei, Hong Kong, London, or Tokyo. Office of Foreign Assets Control (OFAC) The Office of Foreign Assets Control ( OFAC ) of the U.S. Department of the Treasury administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the United States. In order to comply with these regulations, Wells Fargo employs sophisticated software that automatically scans all payments for countries, entities, or individuals that appear on OFAC s sanctions list. If the payment scan results in identifying a transaction that may be related to a sanctioned country or entity, the payment must be stopped and reviewed. We may ask you for additional information to clarify the parties involved in a transaction. We strongly encourage your prompt cooperation in the event your bank receives such an inquiry; this will help to prevent delays in processing your transactions. If a sanctioned party is indeed involved in the transaction, Wells Fargo is required to either block the funds or reject the transactions and report the information to OFAC. Blocked funds can only be released with the authorization of OFAC. While Wells Fargo values its customers and recognizes the importance of expedient processing, if we are required under regulation to block a payment, there is nothing that Wells Fargo or any U.S. bank can do until approval for its release is received from the U.S. Treasury Department. Additionally, this software provides the ability for local regulation sanction lists scanning, e.g., HM Treasury, United Nations (UN), European Union (EU), Government of Japan (GOJ), and Hong Kong Monetary Authority (HKMA). The regulatory authority under which a transaction is subject decides which lists will be scanned. This ensures Wells Fargo s adherence to local regulatory authorities, given our various processing locations throughout the world. Additional information can be found on OFAC s website at default.aspx. Information Reporting and Bank Secrecy Act The Information Reporting and Bank Secrecy Act of 1970 (BSA) is one of the fundamental federal regulations addressing money laundering. The BSA requires banks and other financial institutions to report certain transactions to government agencies. A component of the BSA called The Travel Rule requires financial institutions to pass all relevant information (reference, originating bank, originating party, remitter, beneficiary, beneficiary s banker, and pay-through banks reference) to the next party in the transaction. Financial institutions are also required to report suspicious transactions. Additionally, several amendments to the BSA establish the laundering of proceeds from illegal activities as a criminal offense and require financial institutions to build internal infrastructure with certain required components aimed at prevention, detection, and reporting of suspicious activity through adequate know-your-customer and anti-money-laundering programs and monitoring.

14 9 USA PATRIOT Act The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (USA PATRIOT Act) of 2001 was largely designed to provide law enforcement with additional investigative tools. Title III of this Act, itself titled, The International Money Laundering Abatement and Anti- Terrorist Financing Act of 2001, includes certain provisions intended to aid in the prevention, detection, and prosecution of international money laundering and terrorist financing activities. Primary requirements of the Act include, but are not limited to, the development of comprehensive, risk-focused compliance programs, including enhanced requirements for higher risk customers, the certification of foreign banks with correspondent accounts, and the prohibition of accounts for certain foreign shell banks. A significant distinguishing feature of this Act is that it extends legislative and regulatory requirements for anti-money laundering and counter terrorist prevention from banks to nonbank financial institutions. Dodd-Frank l073 Section 1073 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank 1073) is designed to protect U.S. consumers by providing full transparency to the international payment process and spurring price reduction through competition. It amends the Electronic Funds Transfer Act and Regulation E (U.S. federal law), effectively replacing UCC4A as the law governing U.S. consumer originated international payments. Dodd-Frank 1073 only applies to international payments originated by a natural person from an account at a Remittance Transfer Provider (e.g., U.S. banks or other financial institutions) located in the United States. It does not apply to payments originated by corporates or other non-consumers. The international payment can be to any type of beneficiary (natural person, corporate entity, government, etc.) located outside the United States. Dodd-Frank 1073 mandates that the Remittance Transfer Provider give the U.S. consumer certain pre-payment and receipt disclosures related to payment costs, payment timing, cancellation, and error resolution rights. Regulated by the Consumer Financial Protection Bureau, the compliance is mandatory, effective October 28, Please contact your Wells Fargo representative for further details. How your payments are processed by Wells Fargo When a correctly formatted USD SWIFT or CyberPay payment message is received by Wells Fargo, it is automatically processed and one or more of the following payment types will result, depending on the beneficiary bank: Book transfer (for payment to or through an account at Wells Fargo) CHIPS payment Fedwire payment Check issuance ACH payment The preferred method of settlement for commercial payments is through book transfers. We encourage the use of the serial payment method. By sending a single SWIFT payment message to Wells Fargo, we effect the payment in the most efficient manner and provide all required payment orders and/or advices to the beneficiary bank and/or intermediary bank automatically. There is no need for you to send multiple SWIFT messages to other banks. Wells Fargo maintains one of the most extensive networks of direct correspondent bank relationships in the industry, enabling your payments to be delivered faster and without reliance on additional intermediate banks. Payment instructions that are initiated in the incorrectly formatted SWIFT standards are routed to various processing queues for repair and review. Our experienced processing staff will quickly determine how to repair the message in order to effect the payment in the most efficient manner. Their goal is to complete the payment and to release it the same day it is received, based on the information provided. To aid them in doing so, they have access to extensive databases that help determine the most expeditious routing of your payments.

15 10 There will be circumstances when a payment cannot be effected because of insufficient or incorrect information. The beneficiary bank might be unable to apply the payment due to reasons such as wrong account number, wrong beneficiary name, etc. When our customer service representatives receive these cases, they act quickly, often in conjunction with our local representative in your market, to notify you of the reason why the payment could not be effected. Each inquiry processed by the customer service representative is assigned a case tracking number with a history of all related messages attached. Our advanced investigation system aids us greatly in the rapid resolution of such cases. Wells Fargo strongly recommends that your financial institution adheres to FATF recommendation 16 with respect to ensuring complete originator and beneficiary information. This can greatly improve timely delivery of payments by allowing our staff to correctly determine false hits on our scanning engine. The excellence of our customer service characterizes Wells Fargo s commitment to the payments business. In addition to centralized customer service units, each one of our international offices also maintains local customer service staff with online, real-time access to payments systems globally. They are able to access information locally to provide you with all details of your outbound and incoming payments. Additionally, Wells Fargo offers a browser-based internet tool, CyberInquiry SM, which allows you to see your transactions online, and as well to initiate inquiries. Wells Fargo s payment products The following is a brief description of Wells Fargo s payment products. For more information on these products, please contact your local relationship manager or regional product specialist. USD payment products Commercial payments GlobalPay.USD: These USD payments, initiated through SWIFT MT103 or Wells Fargo s CyberPay system, are defined as those transactions in which at least one party is a non-financial institution (e.g., commercial, retail, or corporate payment, or an open account trade transaction). GlobalPay.USD payments are settled serially to the next party in the payment chain across Wells Fargo s books, via CHIPS, Fedwire, or check. The service supports BEN/SHA and OUR charges, which can be deducted from the proceeds or charged to your account. GlobalPay.Intraday: GlobalPay.Intraday helps bridge time zone differences and ensures that beneficiary banks around the world receive full payment details during their business day. The service is available for transactions in which at least one party is a nonfinancial institution. You send a single commercial payment instruction to Wells Fargo. On the value date, beginning at 21:00 ET for next day s value, we will send an MT103 directly to the beneficiary bank. When the beneficiary bank does not have a direct relationship with Wells Fargo, we will settle covering funds through its correspondent via CHIPS or Fedwire. GlobalPay.PreAdvice: This service allows you to provide advance notification of full payment details up to five days before the value date to the beneficiary bank. GlobalPay.Preadvice is available for transactions in which at least one party is a non-financial institution. You send a single forward-valued commercial payment instruction to Wells Fargo. Up to five days before the value date, we will send an MT103 directly to the beneficiary bank. On the value date, Wells Fargo will complete the transaction by providing the cover funding through a book transfer, CHIPS, or Fedwire payment.

16 11 CyberFile.Transfer: This service is a high-volume, batch-based solution that enables you to batch USD and FX high-value payments and transmit a single batch of payments to Wells Fargo. This is an extremely flexible service that supports standard MT103, MT202, and MT200 payments, or custom file formats. This service is also able to support multiple communication options, including SWIFT FileAct and Wells Fargo s proprietary Data Transmission Services. GlobalPay.File: Bulk File Delivery This service is designed for your high-volume, low-value payments made to beneficiaries on a recurring basis (e.g., dividend, payroll, or pension payments). GlobalPay.File allows you to bulk individual third-party payments to reduce costs and aid in reconciliation. You simply transmit an MT102 file format of payments to Wells Fargo utilizing SWIFT FileAct or SWIFT FIN. Payments sent by this service are effected via CHIPS, Fedwire, book transfer, ACH (U.S.), or check. GlobalPay.FX: This service is designed to enable the processing of payments in currencies other than USD from your USD account with Wells Fargo. You need not maintain numerous nostro accounts to make foreign currency payments, saving you time and expenses. Simply direct these payments in foreign currency to Wells Fargo. We are able to convert them at competitive market rates and can pay in most major currencies. Please contact your local Wells Fargo relationship manager or local customer service manager to obtain a list of available currencies. GlobalPay.FXIQ: GlobalPay.FXIQ is a value-added service available for your cross-border USD payment flow. Based upon defined system rules customized to your unique transaction and client requirements, Wells Fargo can determine if any USD payment orders you send to us could be converted and paid in the beneficiary s local currency. For payments eligible for conversion, Wells Fargo will apply an exchange rate marked up by a pre-agreed upon spread and execute the payment in local currency through our global clearing network. GlobalPay.FXIQ can maximize the foreign exchange revenue potential of your USD international payments, while optimizing your customer s experience. Principal Preservation GlobalPay.PayProtect: Wells Fargo s GlobalPay.PayProtect solution is an efficient and cost-effective alternative to traditional principal preservation services such as OneDeduct and NoDeduct. PayProtect addresses the need for principal preservation while eliminating costly OUR claims by allowing non-deduction fee arrangements between the beneficiary and its bank to remain in place. GlobalPay.NoDeduct: GlobalPay.NoDeduct enables you to instruct that no fees should be assessed to the beneficiary by any bank in the payment chain. The service is available for transactions in which at least one party is a non-financial institution. Wells Fargo charges an all-inclusive fee for each transaction to cover claims for fees from downstream banks. The beneficiary bank and any intermediary bank fees can be claimed back to Wells Fargo by means of a SWIFT MT191. This service requires subscription. GlobalPay.OneDeduct: This service allows you to instruct that only Wells Fargo s processing fees should be assessed to the beneficiary. Wells Fargo will take a single deduction from the payment and instruct that no further charges should be assessed to the beneficiary. The service is available for transactions in which at least one party is a non-financial institution. The Wells Fargo deduction is an all-inclusive fee to cover claims for fees from downstream banks. The beneficiary bank and any other intermediary bank fees can be claimed back to Wells Fargo by means of a SWIFT MT191. This service requires subscription.

17 12 Treasury payments TreasuryPay.USD: This service is designed to assist you with the control and movement of high-volume, large-value, bank-to-bank related USD wire payments. Often, these relate to the settlement of foreign exchange transactions and investment placement and returns, as well as bank-to-bank commercial payments. Wells Fargo provides reliable and timely processing of these large payments. Your payments are backed by the financial strength of Wells Fargo, one of the best capitalized banks in the U.S. Trade payments Trade.Export Collect: This service is used with export letters of credit or documentary collections denominated in USD. This service provides the ability for customers to appoint Wells Fargo as your agent for delivery of export documents and reimbursement claims to the paying banks, tracing payment or acceptance, and receipt of funds on their behalf. TradePay.202 Deduct: Our TradePay.202 Deduct service allows you to instruct that fees for your trade-related payments are for the account of the beneficiary and should be deducted from principal. You need only add a special codeword: /REC/BEN/ in field 72 of outbound SWIFT MT202s. Our system will automatically read the codeword and deduct the fee from the proceeds prior to effecting the payment. In addition to codewords, our system is able to scan fields 20, 21, and 72 of the SWIFT MT202 to detect your predefined reference patterns. Simply provide these reference patterns to Wells Fargo during implementation of the service and we will deduct a fee when your reference patterns are found in the payment order. Other codewords available are: /REC/BEN/, /REC/BEN, /REC//BEN/, /REC/ BEN /, /CHGBEN/, /PR/, /CHARGE/ BEN/, / DEDUCT/, /DFP/, /CHG/BEN/, and /RECBEN/. The codeword must be the only information on line one. If line two if required it must start with a code word. Since the information on line two is not intended for Wells Fargo the /REC/ code word should not be used. If this formatting is not followed the payment will stop in repair. Example: :72:/REC/BEN /ACC/(SUZHOU CITY BRANCH) TradePay.740: This service allows customers to nominate Wells Fargo, as the reimbursing bank under you, to import their letters of credit, denominated in USD, and to instruct Wells Fargo to honor claims from negotiating banks on their behalf. Euro payment products Commercial payments GlobalPay.Euro: These euro payments, initiated by SWIFT MT103 or CyberPay, are defined as those transactions in which at least one party is a non-financial institution (e.g., open account trade transaction, retail, or commercial payment). This service supports BEN/SHA and OUR charges for which the transaction charge can be deducted from the principal or charged to your account via monthly account analysis respectively. GlobalPay.EuroOut: This service is designed especially for European banks wishing to effect euro payments in favor of beneficiaries outside Europe. There is no need to fund an account as payment instructions can be sent to Wells Fargo via the euro payment systems EBA, Euro1, or TARGET2. Wells Fargo will use its comprehensive databases to identify the euro correspondent of the beneficiary bank and will even convert and pay in another currency if the beneficiary banks cannot accept euro. All of the normal charging options are available.

18 13 Treasury payments TreasuryPay.Euro: This is designed for the high-value euro transfers related to treasury activities, such as foreign exchange, money market transactions, and other interbank payments, where no fee deduction is required. Initiation by SWIFT is through the MT2xx series of messages (MT200/1/2/3). In CyberPay, the bank transfer screens are used. Trade payments TradePay.Euro 202Deduct: This service is particularly useful to capture charges for your euro trade payments, such as LC-related remittances, where charges are for the account of the beneficiary. You only need to add a special codeword, /REC/BEN/, in field 72 of the outbound SWIFT MT202. Our systems will automatically read this codeword and deduct the fee from the proceeds before effecting the payment. In addition to codewords, our system is able to scan fields 20, 21, and 72 of the SWIFT MT202 to detect your predefined reference patterns. Simply provide these reference patterns to Wells Fargo before implementing the service, and we will deduct a fee when your reference patterns are found in the payment order. Other codewords available are: /CHG/BEN/, /RECBEN/, /DEDUCT/, /DFP/, and /DEDUCT//REC/. The codeword must be the only information on line one. If line two if required it must start with a code word. Since the information on line two is not intended for Wells Fargo the /REC/ code word should not be used. If this formatting is not followed the payment will stop in repair. Example: :72:/REC/BEN /ACC/(SUZHOU CITY BRANCH) TradeEuro.Export Collect: This is used with export letters of credit or documentary collections denominated in euro. This service provides the ability for you to appoint Wells Fargo as your agent for reimbursement claims to the paying bank, tracing of payment of acceptance, and receipt of funds on their behalf. TradePay.Euro 740: This service enables you to instruct Wells Fargo, as the reimbursing bank under you, to import letters of credit, denominated in euro, and to instruct Wells Fargo to honor claims from negotiating banks on their behalf. Yen payment products Commercial payments GlobalPay.Yen: This service allows you to initiate commercial payments in favor of your beneficiaries in Japan. Wells Fargo is a direct member of the Foreign Exchange Yen Clearing System (FXYCS), which ensures your payments are remitted directly to beneficiary banks. On receipt of your MT103 payment instruction, our Tokyo branch (BIC: PNBPJPJX) in favor of the beneficiary, the transaction is transferred to the beneficiary s bank. Forward value payments can be warehoused (i.e., up to 10 days) until the value date and the transaction is processed via book transfer or FXYCS. Funds received from your counterparties will be automatically credited to your account in real-time with intraday information available in CyberInquiry or CyberBank Reporting sysems. Wells Fargo offers a NODEDUCT service option in addition to normal charging options of OUR, SHA, and BEN. Wells Fargo provides competitive cut-off times for sameday value payment instructions.