International payables move faster and in higher volumes than ever, but every transfer rides on a stack of rules: who is paying, who is getting paid, what tax applies, what data must be retained, and how fraud risk is contained. The following article maps those obligations and shows how finance teams can build a secure international invoice payment guide that aligns with regulation while they reduce overseas payment risk, protect against FX fraud, and pick the best way to pay a foreign supplier without drowning in paperwork.
1. Why compliance sits at the core of cross-border payments
Three pillars define the compliance perimeter:
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Know Your Customer (KYC) / Know Your Business (KYB) – verify counterparties and the people behind them. FATF Recommendation 10 states plainly: “Financial institutions should be prohibited from keeping anonymous accounts or accounts in obviously fictitious names.” (State Finance Monitor)
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Anti-Money Laundering (AML) / Counter-Terrorist Financing (CTF) – monitor transactions, detect suspicious activity, and report it.
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Indirect tax (VAT/GST) on services and goods – determine the place of taxation and record evidence. The OECD explains that its International VAT/GST Guidelines aim to “reduce the uncertainty and risks of double taxation and unintended non-taxation” in cross-border contexts. (OECD)
Scale amplifies the stakes. SWIFT handled an average of 44.8 million FIN messages per day in 2022, up 6.6% year on year. (Swift) More traffic means more false positives if controls are crude, and more room for invoice scams abroad if controls are weak.
Fraud data underlines the point. UK Finance logged £24.8 million in invoice and mandate scam losses in just the first half of 2023, with 71% hitting business accounts. (UK Finance) The ACFE’s 2024 study covers 1,921 occupational fraud cases across 138 jurisdictions, showing how pervasive internal control failures can be. (ACFE)(Ivey Business School)
2. Core legal anchors and what they demand
2.1 FATF Recommendations and national transposition
FATF provides the global benchmark. Recommendation 10 requires identification and verification of customers, beneficial owners, and ongoing due diligence. (State Finance Monitor) Regional bodies (APG, ESAAMLG, etc.) mirror these standards; the Asia/Pacific Group repeats the same prohibition on anonymous accounts. (apgml.org)
2.2 United States: FinCEN’s CDD Rule
FinCEN’s 2016 CDD Rule obliges covered institutions to identify beneficial owners of legal entity customers. The agency’s FAQ clarifies the threshold: collect information at 25% ownership and one control person. “Covered financial institutions must obtain from their legal entity customers the identities of individuals who satisfy the definition” and the rule “sets forth the standard” at 25%. (FinCEN.gov) The rule is now being tightened further under the Corporate Transparency Act registry, which reduces reliance on bank collection alone, but banks still must reconcile their files.
2.3 European Union: 2024 AML package
The EU adopted Regulation (EU) 2024/1624 on 31 May 2024 to harmonise AML measures. (EUR-Lex) Market commentary summarises a new €10,000 cash payment cap for business transactions, with member states free to set lower limits, and mandatory ID checks for cash payments of €3,000 or more. (Deloitte) For corporates, the cash cap matters less than the documented obligation to verify counterparties and source of funds across all payment channels.
2.4 VAT/GST on cross-border services and goods
The OECD Guidelines (2017) set the principle that VAT on services should generally be collected in the customer’s jurisdiction, requiring suppliers to register or use simplified regimes. (OECD) For EU businesses, One-Stop Shop (OSS) and Import OSS regimes reduce friction but still demand audit-ready records of where the customer resides and whether VAT was charged.
Average remittance fees show why tax and fee optimisation matter: sending US$200 cost 6.2% on average in Q2 2023, with banks at 12.1%. (World Bank) Finance teams looking to lower fees on global invoices should benchmark providers against that spread.
3. Building an operational KYC/KYB file
3.1 Beneficial ownership and control test
Minimum data points:
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Legal name, registration number, and jurisdiction
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Ownership chart to the natural person level at or above the regulatory threshold (25% in the US FinCEN rule; some EU states apply 10% in high-risk sectors) (FinCEN.gov)(EUR-Lex)
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One senior managing official when no individual meets the threshold
Store scanned corporate documents, registry extracts, and attestations. Timestamp collection dates; regulators focus on “staleness.”
3.2 Risk-based refresh cycles
FATF frames due diligence timing on “materiality and risk.” (State Finance Monitor) High-risk vendors (sanctioned geographies, PEP ties, complex ownership) merit annual refresh, while low-risk may move on a three-to-five-year cycle with trigger-based updates (material ownership change, unusual payment pattern).
3.3 Screening layers
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Sanctions (OFAC, EU, UN) – automatic daily batch screening.
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Adverse media – negative news monitoring to catch fraud, tax evasion or environmental crimes.
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PEP and RCA lists – politically exposed persons and relatives/close associates.
4. Transaction monitoring for cross-border AP
Once a vendor is onboarded, every invoice flows through transaction monitoring. Elements include:
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Rule-based thresholds: split payments just under €10,000 or US$10,000 trigger alerts. (Deloitte)
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Behavioral analytics: unexpected corridor (e.g., supplier registered in Germany, bank account in Latvia).
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FX anomaly detection to protect against FX fraud – unusual rate spreads or last-minute currency changes.
Invoice-mandate scams exploit communication gaps: criminals intercept email threads and change bank details. UK Finance advises: “Always confirm any bank account details directly with the company either on the telephone or in person before you make a payment.” (UK Finance) Embedding that sentence in AP playbooks is a simple cross border payment compliance tip.
5. VAT evidence pack for international invoices
Cross-border VAT hinges on three questions:
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Place of supply – where is the customer located? OECD guidance points to customer location for services. (OECD)
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Customer status – business or consumer?
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Proof set – two non-contradictory items (billing address, IP, bank location) often needed.
A practical international vendor payment checklist for VAT:
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Customer VAT number (validate via VIES in the EU)
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Contract and statement of work with service location
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Shipping documents and import declarations for goods
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Evidence of export (bill of lading, airway bill) to support zero rating
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FX rate source used for VAT reporting (ECB, HMRC, IRS)
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Archived invoice PDF and structured data (UBL/Peppol) for audit retrieval
These records must be retained for the statutory period (often 10 years in the EU for e-commerce supplies).
6. Designing a safe cross-border invoice process (end-to-end)
The safe cross border invoice process spans eight control gates:
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Vendor initiation – collect KYC/KYB, tax forms (W-8/W-9, EU VAT ID), and bank validation.
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Bank account verification – independent source validation (SWIFT BIC directory, micro-deposits, Confirmation of Payee where available).
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Sanctions & PEP screen – initial and daily batch.
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Contract review – payment terms, incoterms, currency clauses, tax responsibility.
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Invoice intake – OCR/e-invoice portal with digital signature checks.
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Three-way match – PO, goods receipt, invoice.
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Payment run controls – dual approval, FX rate tolerance bands, beneficiary change lockout period.
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Post-payment monitoring – anomaly dashboards, clawback procedures.
Embedding these gates “safeguarding international AP workflow” limits both regulatory and operational incidents.
7. FX risk and fraud: controls that matter
7.1 Rate integrity
Treasury should lock rates via approved platforms; AP should only book payments at rates within a narrow tolerance band against the day’s published benchmark. Sudden supplier requests to switch currency are red flags for business email compromise (BEC).
7.2 Payment channel choice
World Bank data shows banks are the costliest remittance path at 12.1% average cost for a US$200 transfer, far above mobile operators at 4.1%. (World Bank) Corporate payments are larger, but the spread is instructive. A tiered provider model (bank for high-value, specialist fintech for routine invoices) helps lower fees on global invoices without sacrificing compliance, provided both are onboarded to the same KYC standards.
7.3 Segregation of duties and callback culture
No single person should both change supplier bank details and approve payments. Mandatory call-backs to a verified phone number before first or changed payments block many scams. UK Finance’s guidance already cited should be written into SOPs. (UK Finance)
8. Documentation architecture: data you must be able to produce
Auditors and regulators want to see: what you knew, when you knew it, and what you did. A workable archive includes:
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CDD files – IDs, corporate docs, ownership attestations, screening logs. FATF expects records to be available for competent authorities. (State Finance Monitor)