How to Solve a Problem Like Instant Payments Fraud? Putting in place an effective Verification of Payee!
Europe’s move to instant payments could transform corporate finance but there is a risk that its fraud protection measures, specifically the new verification of payee protocol, are not effectively managed by Payment Service Providers and Financial Institutions. In this blog, François Masquelier, Chair European Association of Corporate Treasurers (EACT), shows how the LEI offers a robust alternative to name matching, enabling secure, automated cross-border payments and an effective implementation of instant payments for the Corporate Treasurer Community.
Author: François Masquelier, Chair, EACT
Date: 2025-06-03
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Instant payments are transforming treasury operations. Funds move in real time, improving cash flow, reducing settlement risk, and enabling agile financial decision-making. Yet immediacy also brings vulnerability. Payments are irrevocable, making mistaken or fraudulent transactions harder to detect and more costly to correct.
Fraud is of most concern. A recent analysis by the European Banking Authority (EBA) revealed that, on average, the fraud rate for instant credit transfers in 2022 was ten times higher than for regular credit transfers. While some progress has been made since, developments such as the growing sophistication of artificial intelligence and deepfakes, which are increasing the potency and plausibility of common attacks such as invoice fraud and business email compromise, are compounding the threat faced by corporate treasurers.
To address the significant and evolving challenges posed by instant payments fraud, it is crucial to verify the payee's identity and confirm that the bank account belongs to the legitimate entity claiming ownership before the payment is executed.
"Instant payment will only be successful in Europe […] if the originator can be guaranteed to pay the beneficiary [they] intended to credit."
Fabrizio Dicembre, Vice Chair, Luxembourg Association of Corporate Treasurers (ATEL)
Encouragingly, the EU has taken a leading role in this regard with the introduction of the Instant Payment Regulation (IPR). A key pillar of the IPR is the mandate that all Eurozone payment service providers verify a payee's name against their international bank account number (IBAN) – known variably as Verification of Payee, Confirmation of Payee, or IBAN Name Check – before processing transactions by October 09, 2025. The deadline for non-Eurozone PSPs is July 09, 2027.
"Checking the beneficiary of a bank account already existed successfully in some countries. But it was time to extend this type of control, which will one day become an international standard, to cross-border payments in the European Union."
Karen Van den Driessche, Head of Treasury, LIPTON
While this undoubtedly marks a decisive step forward, matching a name to an account isn't foolproof. Similar or misspelled names often trigger "close match" errors, forcing treasurers to engage in time-consuming and laborious manual interventions. This not only erodes the promise of genuinely instant payments but also introduces the risk of human error and presents openings for fraudsters to exploit.
One reason for the enduring prevalence of close match errors has been the fragmentation created by the lack of a globally consistent identifier for payees across borders, legal jurisdictions, and payment schemes. Research from Nth Exception, a payments technology and consulting firm, found that 98% of false match alerts occur due to poor underlying data quality.
Yet there is an answer to this challenge that can enable fast, accurate, and automated payee verification – the Legal Entity Identifier (LEI).
The LEI Advantage: Clarity, Security, and Scale
The LEI is the only global standard for identifying legal entities. Unlike national registration numbers, the LEI is a universal, standardized identifier under ISO 17442 and is digitally accessible. No two LEIs are ever the same, meaning that anyone, anywhere, can cross-reference who an organization claims to be, together with its ownership structure and subsidiary relationships, against a legitimate and verified data source. This enables the beneficiary (payee) legal entity to be precisely, instantly, and automatically identified across borders and jurisdictions.
Notably, the IPR recognizes the LEI as a tool to facilitate the matching of IBAN to account names. This marks a compelling opportunity for corporate treasurers to unlock several vital benefits, beyond short-term compliance requirements, by integrating LEIs into the payee verification process for instant payments:
Eliminates Close Matches: With one unique LEI per entity, there are only two outcomes – "Match" or "No Match" — no more grey areas.
Enables Straight-Through Processing: Exact matches mean no delays, no manual steps, and no supplier callbacks to reconcile differences.
Reduces Fraud: Fraudsters can't spoof a legitimate LEI. IBAN plus LEI matching exposes tampering attempts before a payment is executed.
Supports Cross-Border Payments: The LEI is not bound by borders, streamlining transactions across jurisdictions and currencies.
Improves Broader Regulatory Compliance: The LEI is widely endorsed and mandated by financial regulators, supporting compliance and alignment with existing and upcoming requirements.
Understanding the Real-World Impact for Treasurers
As the deadline for implementation approaches, some service providers are encouraging Corporate Treasurers to "opt out" given the complexity and uncertainty associated with name matching. The instant payments regulation and supporting guidance specify that payers who are not consumers and submit multiple payment orders as a package (i.e., bulk payments) are allowed to opt out of receiving VoP results in their contractual relationship with their payment service provider (PSP). This means corporate treasurers or similar business users can choose not to receive VoP checks for each payment within a bulk file.
Given the important benefits noted above, especially VoP as a fraud prevention measure, it is of top interest to Corporate Treasurers to opt in and to ensure that their service providers leverage the LEI to provide Corporate Treasurers with an efficient and effective VoP service.
As is outlined above, the benefits extend far beyond risk mitigation. LEI adoption is a pathway to greater efficiency, automation, and strategic control. Payments flow faster. Errors are reduced. Fraud defenses are strengthened. With fewer operational disruptions, treasury teams can focus on value-added activities.
What Should Businesses Do Now?
As the financial ecosystem becomes faster and more digital, security and trust must scale in tandem. Here, the LEI and vLEI promise to play a fundamental role by hardwiring verifiable organizational identity—and therefore trust—into every business relationship. This can help ensure the integrity of instant payments, support regulatory alignment, and strengthen resilience in an era of increasing and evolving cyber and financial threats.
"With the implementation of the Legal Entity Identifier (LEI), corporate treasurers can unlock numerous benefits in areas such as onboarding, fraud reduction, and operational efficiency. For these advantages to be fully realized, however, the ecosystem supporting the corporate treasurer - including vendors and service providers offering treasury management services, Enterprise Resource Planning (ERP), Know Your Customer (KYC), and payments surveillance tools - must evolve to effectively incorporate the LEI as well."
Guillermo De la Fuente, Chair, European Association of Corporate Treasurers (EACT)
Now is the time for corporate treasurers, solution providers, and banks to embrace the LEI as a core building block of modern treasury operations. The good news is that with the IPR deadline looming, LEI adoption is straightforward, and the benefits are immediate. Here's how corporate finance teams can get started:
Obtain an LEI: Ask your bank or register directly through an accredited LEI issuer.
Ensure Supplier Coverage: Encourage key suppliers to obtain or renew their LEIs.
Update Internal Systems: Work with ERP and treasury solution providers to integrate LEI data into payment messaging and verification processes.
Collaborate with Your Bank: Understand how your financial institution plans to use the LEI for payee verification and fraud protection.
Outlook: Future-proofing treasury functions
Looking ahead towards future-proofing treasury functions, the development of the verifiable Legal Entity Identifier (vLEI) represents the next frontier. The vLEI is a digitally verifiable, cryptographically secure LEI that binds legal entities to individuals acting on their behalf. In the context of payments, the vLEI can create a tamper-proof link between an IBAN and its account holder, making payment fraud virtually impossible and enabling frictionless verification across systems and borders.
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François has founded Simply Treasury, a company that delivers advisory services in treasury, corporate finance, and Enterprise Risk Management (ERM). From before December 2019 until then, he served as Head of Corporate Finance, Treasury, and Enterprise Risk Management at RTL Group. Before, he worked for Eridania Béghin-Say and ABN.AMRO.
He is Chair of the Association of Corporate Treasurers of Luxembourg (ATEL) and Chair of the European Association of Corporate Treasurers (EACT).
François launched his Treasury Technology Map in 2022 (www.treasurymap.com), which has become a market reference for selecting corporate treasury solutions.
