BIS, central banks embed regulatory compliance in cross-border payments

Project Mandala has now reached proof of concept stage.

The Bank of International Settlements (BIS) along with partner central banks from Singapore, Australia, Malaysia, and South Korea, have successfully demonstrated that regulatory compliance can be embedded in cross-border transaction protocols through Project Mandala.

The Monetary Authority of Singapore (MAS), the Reserve Bank of Australia, the Bank of Korea, and Bank Negara Malaysia worked as collaborators of BIS and the BIS Innovation Hub Singapore Centre.

Under Project Mandala, the stakeholders developed a compliance-by-design decentralised system, which streamlines cross-border payments by embedding regulatory compliance within a network of financial institutions and central banks.

This decentralised architecture integrates three core components: a peer-to-peer messaging system, a rules engine and a proof engine. This reportedly helps ensure that all compliance checks are done before payment is initiated.

The project has now reached the proof of concept stage.

“[It] has the potential to reduce costs  and increase transaction speed, while preserving regulatory compliance,” BIS, along with its partners, commented regarding Project Mandala.

Project Mandala notably proved its technical feasibility through two primary use cases.

First was a cross-border lending use case between Singapore and Malaysia. Mandala reportedly streamlined the compliance processes for capital flow management measures (CFM) and sanctions screening for financial institutions and facilitated real-time compliance monitoring for  central banks.

The second use case involved cross-border financing for capital investments between South Korea and Australia. Here, Mandala automated the sanctions screening and CFM reporting requirements for an  unlisted securities transaction.

Mandala successfully integrates with both nascent digital asset settlement systems,  such as a wholesale central bank digital currency, and traditional payment messaging systems like Swift.