BPI and TCH Comment on FedNow Cross-Border Payments Rule

Dear Mr. McDonough,

The Clearing House Association^[1] and the Bank Policy Institute^[2] ("Associations") appreciate the opportunity to respond to the proposed rule and request for comment ("Proposal") on amendments to subpart C of Regulation J (governing the FedNow® Service) issued by the Board of Governors of the Federal Reserve System ("Board").^[3] The Associations support the objectives of the Proposal to expand the use of always-on payments rails for cross-border payments and the resiliency benefits of enabling additional payment services to settle the U.S. legs of cross-border funds transfers.

While we generally support the Proposal, we make recommendations below to ensure that it can be successfully implemented by participating depository institutions. Among other recommendations, we first note that we expect FedNow participants would need to implement real-time sanctions screening of FedNow payment messages that facilitate cross-border transactions in order to comply with their sanctions obligations.^[4] To aid in the identification of cross-border payments, we suggest the Board and Federal Reserve Financial Services (FRFS) consider a specific FedNow message code to designate cross-border transactions.

Second, as participating depository institutions may need time to develop the technological capabilities to implement real-time sanctions screening of FedNow payment messages, we recommend a two-phase implementation plan. During an initial pilot period, depository institutions should have the ability to opt-in to receiving and sending cross-border transactions over FedNow. Later, depending on industry readiness and the results of the pilot period, all FedNow participants could be required to accept cross-border transactions. A two-phase implementation plan will speed innovative use cases to market while allowing depository institutions with a strong domestic focus sufficient time to upgrade their capabilities.

Third, to support banks' ability to use real-time screening processes, we request that the Board and FRFS work with industry to consider whether adjustments to the FedNow message response requirements and timeframes under Operating Circular 8 and the FedNow® Service Operating Procedures are appropriate.^[5] Indeed, we believe additional changes to these documents will be necessary to enable the functionality described by the Proposal while still allowing FedNow participants to comply with their sanctions obligations. Forthcoming modifications to Operating Circular 8 and the FedNow® Service Operating Procedures should include amendments to clarify when the FedNow rulesets begin to apply, and stop applying, to transactions executed over multiple payment rails, and we respectfully request that the industry be provided a meaningful opportunity to review and comment on any such modifications and amendments.

To read the full comment letter, please click here, or click on the download button below.

[1] The Clearing House Association L.L.C., the country's oldest banking trade association, is a nonpartisan organization that provides informed advocacy and thought leadership on critical payments-related issues. Its sister company, The Clearing House Payments Company L.L.C., owns and operates core payments system infrastructure in the United States, clearing and settling more than $2 trillion every business day.

[2] The Bank Policy Institute is a nonpartisan public policy, research and advocacy group that represents universal banks, regional banks, and the major foreign banks doing business in the United States. BPI produces academic research and analysis on regulatory and monetary policy topics, analyzes and comments on proposed regulations, and represents the financial services industry with respect to cybersecurity, fraud, and other information security issues.

[3] Board of Governors of the Federal Reserve System, Collection of Checks and Other Items by Federal Reserve Banks and Funds Transfers Through the Fedwire Funds Service and the FedNow Service; Regulation J, 91 Fed. Reg. 18330 (Apr. 10, 2026).

[4] "The Federal Reserve Banks do not require real-time transaction screening in their terms…." Federal Reserve Financial Services, FedNow® Service Operating Procedures, Version 3.6, (April 2026), fn. 3, at 8, available at: https://www.frbservices.org/binaries/content/assets/crsocms/resources/rules-regulations/042826-fednow-service-operating-procedures.pdf.

[5] Federal Reserve Banks, Operating Circular 8, Funds Transfers Through the FedNow® Service, (April 1, 2026) available at: https://www.frbservices.org/binaries/content/assets/crsocms/resources/rules-regulations/040126-operating-circular-8.pdf. FedNow® Service Operating Procedures, supra note 4.