Banking & Fintech / 14.09.2024

CESOP: How to Correctly Identify the Location of the Payer and Payee?

CESOP reporting is a complex process that requires payment service providers (PSPs) to carefully manage multiple factors. One of the key aspects is the cross-border nature of transactions, particularly the identification of the location of the payer and payee. This allows PSPs to determine whether a given payment is domestic or cross-border, and thus subject to reporting obligations.

CESOP reporting requires precise identification of the location of the payer and payee in transactions.

Location of the Payer and Payee – A Key Element of CESOP Reporting

The location of the payer, who is based in a Member State, is determined using the following data:

IBAN of the payer’s (or payee’s) payment account or any other identifier that uniquely identifies the payer (or payee) and indicates their location.

If the payment service provider does not possess the identifiers that localize the payer (or payee), they should focus on:

BIC or any other institutional identification code that uniquely identifies the payment service provider acting on behalf of the payer (or payee) and provides their location.

The scheme proposed by the legislator sets out the sequence of identification steps, which indicates that firstly it should be attempted to locate the payer (payee). Then, in the absence of suitable identifiers, it should be attempted to locate the payer’s (payee’s) payment service provider.

The priority in identification is to first locate the payer, followed by the payer's payment service provider.

What Identifiers Should Be Used?

The European Commission emphasises that there is no specific order in which the identifiers contained below should be applied. Of course, except the obligation to identify the payer (payee) of the payment at first.

Payment method	Intra-EU transactions (payment service providers of the payee are required to report)
	Location of the payer	Location of recipient
Credit transfer	IBAN number BIC of the payment service provider	IBAN number BIC of the payment service provider
Direct debit	IBAN number BIC of the payment service provider	IBAN number BIC of the payment service provider
Electronic money	Payee’s electronic account (location taken on registration / onboarding) IBAN number Electronic vouchers: vendor country code	Payee’s electronic account (location taken on registration / onboarding) IBAN number
Card payments	BIN	Merchant address
Money remittance	Payout partner’s BIC	Location of payee (own records)

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