Defining the Intermediary Role

Why It Matters

Payment intermediaries, whether PSPs or VASPS, play a crucial role in maintaining the integrity and traceability of funds as they move across borders. FATF Recommendation 16, EU Regulation 2015/847, and UK MLRs impose clear obligations on intermediary PSPs and VASPs to retain and transmit complete payer and payee information. Failure to do so can break the data chain and result in non-compliance.

Who is an Intermediary?

You are acting as an intermediary if:

• You process a cross-border transfer between a payer and payee where you are not the sender or final recipient

• You relay the transaction through your infrastructure (e.g. SWIFT, correspondent network, blockchain node)

What Are Their Core Responsibilities?

Intermediaries need to:

• Retain Full Payer & Payee Information

  Do not delete, truncate, or modify any identifying data received. You must preserve both payer and payee details throughout the transaction chain.

• Forward the Data Without Alteration

  Ensure all originator and beneficiary information is passed on to the next PSP or VASP. This includes ensuring compatibility between messaging formats and preventing data loss.

• Detect Missing or Non-Compliant Information

  You are not required to verify the identity of either party—but you must have risk-based procedures to detect when required information is:

  • Missing entirely

  • Clearly incomplete or corrupted

  • Present but non-usable (e.g. dummy values)

• Take Risk-Based Action

  When deficiencies are found, you must determine whether to:

  • Reject the transaction

  • Suspend or delay it while querying the sending PSP/VASP

  • Flag it internally for post-event review or reporting

FATF Travel Rule Expectations for VASPs

For virtual asset transfers:

• Intermediary VASPs must retain payer/payee information and ensure it is transmitted in accordance with Travel Rule standards (e.g. IVMS101)

• Use of encrypted or private blockchains does not exempt intermediary VASPs from these obligations

Format & Message Compatibility

SWIFT MT messages (e.g. MT103) are prone to data truncation; ensure field size and format do not result in dropped info

ISO 20022 formats provide structured fields but must be mapped correctly between PSP systems

VASPs using APIs or blockchain protocols should confirm data integrity across hops

Documentation & Controls

Intermediary PSPs and VASPs must maintain transaction logs that demonstrate data continuity across all intermediary steps. It is essential to implement system checks that confirm all required fields are populated before a transaction is forwarded. In cases where data issues or anomalies arise, exceptions should be escalated in accordance with documented standard operating procedures (SOPs).

Summary

Intermediary PSPs and VASPs serve as critical gatekeepers in the flow of funds. Ensuring the unbroken transmission of payer/payee data and not just processing payments, is central to regulatory compliance. Build in the checks, document the handoffs, and align your systems to regulatory expectations.