KUALA LUMPUR: The Bank for International Settlements (BIS) and its central bank partners say Project Mandala has shown that regulatory compliance can be embedded in cross-border transaction protocols.
The experimental project is a collaboration between the BIS Innovation Hub Singapore Centre, the Reserve Bank of Australia, the Bank of Korea, Bank Negara Malaysia and the Monetary Authority of Singapore.
The project, which has now reached proof of concept stage, aligns with the G20 priority actions for enhancing cross-border payments, as it has the potential to reduce costs and increase transaction speed, while preserving regulatory compliance.
'Mandala is pioneering the compliance-by-design approach to improve cross-border payments without compromising privacy or the integrity of regulatory checks,' said Maha El Dimachki, head of the BIS Innovation Hub Singapore Centre, in a joint statement.
'We are optimistic about the potential of these early results to enhance cross-border payments,' she added.
BIS said Project Mandala aims to increase the speed and efficiency of cross-border transactions by automating compliance procedures, enhancing transparency of country-specific policies and providing real-time reporting and monitoring for regulators and supervisors.
The project proved its technical feasibility through two primary use cases.
First is the cross-border lending between Singapore and Malaysia, where Mandala 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 other is the cross-border financing for capital investments between South Korea and Australia. Mandala automated the sanctions screening and CFM reporting requirements for an unlisted securities transaction.
Bank Negara assistant governor Dr. Norhana Endut said Project Mandala has given them a peek into the future of cross-border payments.
"We have successfully demonstrated a potential solution to address key challenges with existing compliance processes, unlocking the pathways for faster, more secure, and efficient international transactions.
"This project serves as a critical building block for further advancements in cross-border payments. It would also reinforce our collective commitment to fostering greater economic and financial integration while enhancing regulatory oversight capabilities," she added.