New KYC Obligation for Central Settlement Companies – Are You Ready?
- 10. Juni
- 2 Min. Lesezeit
New Regulation for Central Settlement Companies: Mandatory Supplier KYC from July 2027 in all EU countries
From 1 July 2027, central settlement companies in Germany and other EU countries will, for the first time, be required to implement a comprehensive, ongoing KYC (Know Your Customer) process for their suppliers. With this move, regulators are setting a new regulatory standard that will permanently reshape the central settlement (CS) business model. What does this mean in practice – and how can CS companies meet the new requirements efficiently?
AT A GLANCE
From July 2027, central settlement companies must carry out full KYC onboarding for every supplier, establish ongoing monitoring of the business relationship, and file a suspicious activity report with the FIU (Financial Intelligence Unit) whenever red flags arise.
What Changes from July 2027?
The new regulation requires central settlement companies to set up a KYC process for their suppliers of a kind that, until now, was standard only in the banking sector. The core requirements rest on three pillars:
Initial KYC onboarding: identifying the beneficial owner, screening against sanctions lists, PEP screening, and assessing the risk profile of every supplier.
Ongoing monitoring: continuous monitoring of the business relationship – including transaction monitoring, regular updates of KYC data, and automated screening against current, relevant sanctions and watch lists.
Alert management and FIU reporting: where red flags appear, alerts must be processed systematically and – where there is a suspicion of money laundering or terrorist financing – reported to the FIU.
The Challenge for Central Settlement Companies
For many central settlement companies, the new KYC obligation is a substantial organisational and technical challenge. Until now, the focus has been on efficiently processing payment flows between retailers and suppliers – not on the regulatory vetting of business partners. On top of this comes Remediation: every existing supplier relationship must be retroactively subjected to a full KYC review – an enormous undertaking, depending on the size of the supplier portfolio.
The Gap in the Market: No Suitable Solution in Sight
Anyone scanning the market today for a suitable solution faces a dilemma. Existing providers fall into two categories – but neither of them addresses the KYC requirements of the central settlement business:
CS operational software providers (e.g. GWS/gevis, raw, SGH Service): these systems cover billing, invoicing, and payment processing – but offer no legally compliant KYC/AML functionality for supplier due diligence.
Generic KYC/AML platforms (e.g. CRIF, Fenergo, KPMG Sapphirus, Pythagoras): these solutions are powerful and come from the banking sector, but they are not designed for the specifics of central settlement – del credere structures, buying-group logic, and supplier-centric KYC are not supported natively.
The result: central settlement companies would have to customise a generic platform at considerable expense or engage a costly consultancy. Until now, a solution that natively understands the central settlement business model simply did not exist.
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