Public consultation on the Real-Time Rail legal framework now open

The Canadian Payments Act

Payments Canada was established by Parliament in 1980, through the Canadian Payments Act (CP Act), which sets out our mandate, governance, oversight and the types of organizations eligible for membership.

Mandate

Payments Canada’s objects, pursuant to subsection 5(1) of the CP Act are to:

• Establish and operate national systems for the clearing and settlement of payments and other arrangements for the making or exchange of payments;
• Facilitate the interaction of its clearing and settlement systems and related arrangements with other systems or arrangements involved in the exchange, clearing or settlement of payments; and 
• Facilitate the development of new payment methods and technologies.

In pursuing its objects, Payments Canada has a duty to promote the efficiency, safety and soundness of its clearing and settlement systems and take into account the interests of Users.

Governance and oversight

Payments Canada is governed by and operates within a robust regulatory framework. The CP Act sets out the oversight responsibilities of the Minister of Finance and the role of the Board of Directors. Payments Canada’s Board of Directors may make by-laws and rules to support the attainment of its objects. It also establishes two advisory councils: The Member Advisory Council (MAC) and Stakeholder Advisory Council (SAC). Their purpose is to provide advice and counsel to the board.

The oversight responsibilities of the Minister of Finance relative to Payments Canada include the authority to review and disallow rules and to issue directives, including a directive to make, amend, or repeal a by-law, rule, and standard. This legal framework supports the efficiency, safety and soundness of Payments Canada’s systems.

The Payments Canada Board of Directors consists of a majority of independent directors which includes the president and CEO, seven independent directors (including the chair) and five member directors.

The Payment Clearing and Settlement Act (PCSA) assigns the Bank of Canada responsibility for overseeing clearing and settlement systems for the purpose of controlling systemic risk and payment system risk. The ACSS has been designated as a prominent payment system and Lynx as a systemically important system. As such, this brings both systems under the oversight of the Bank of Canada. It is expected that the RTR will be designated as a prominent payment system.

Payments Canada membership

The CP Act sets out Payments Canada’s membership requirements. In order to be eligible to apply to participate on Payments Canada’s systems, a financial institution must be a member of Payments Canada. Today, there are approximately 109 financial institution members of Payments Canada.

As is described in the CP Act, Payments Canada members are in one of two categories of membership: mandatory members or entitled members. Mandatory members include chartered banks and entitled members are those that may choose to become members, for example credit union centrals or life insurance companies.

All Payments Canada members will be eligible to become RTR participants. Members interested in becoming RTR participants will need to complete an application process, and meet the required participation requirements within the RTR rules and supporting documents. Requirements for membership are outlined in the Membership Requirements Regulations and in By-Law No. 1 - General.²

Value of membership

• Access to payment services (i.e., Financial Institutions File, Corporate Creditor Identification Number).
• Eligibility to apply for seats on the Board of Directors, the Member Advisory Council and other working groups.  
• Access to member reports and other research.
• Eligibility to apply for system participation.

Membership and system participation

In order to become a system participant, Payments Canada members must meet the participation requirements associated with each system as part of their application, which must be approved by Payments Canada prior to participation. Each system is unique in its structure, risk model and requirements for participation. Participation in one system does not guarantee nor result in the participation in another.

Canadian Payments Act membership expansion

The amendments to the CP Act received Royal Assent in 2024. Once the amendments come into force³, Payments Canada membership eligibility will expand to include:

• Payment service providers as defined in section 2 of the Retail Payment Activities Act that perform retail payment activities, as defined in that section.
• Provincial credit union locals that are members of a central.
• Clearing houses as defined in section 2 of the PCSA of a clearing and settlement system designated under subsection 4(1).

The Real-Time Rail

The RTR is a real-time gross settlement (RTGS) payment system that facilitates the exchange, clearing and settlement of irrevocable payments in real-time, 24/7/365. As an RTGS system, the RTR facilitates the final and immediate settlement of transactions between financial institutions on a per transaction basis.

Real-time payments are single credit transfer push payments. Once a payment is initiated on the RTR, the payment must be exchanged, cleared and settled between the sending and receiving financial institution within 10 seconds. Subject to certain exceptions, funds must be made available to the payee or recipient of the payment, within 60 seconds after settlement (see Figure 2).

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Foundational requirements of the RTR

The RTR is designed to uphold a set of foundational requirements that was derived from a comprehensive process involving regulators, insights gained from international initiatives and feedback from the domestic market.

• Always on 24/7/365 availability: Payment exchange including settlement, is available any day of the year (including holidays), 24 hours a day.
• Funds availability: Funds made available to end user accounts within 60 seconds.
• Real-time processing: Payment exchange including settlement, completed within seconds, with immediate funds and data available.
• Payment finality: An RTR payment cannot be cancelled, amended or recalled once sent to the RTR and it is considered final and complete within seconds.
• Account number-based routing: Payment routing will be based on account numbers and institution transit numbers. If alias is used in payment instructions, sending participants of Competitive Services will be responsible to resolve them to account numbers prior to the payment being submitted to the RTR.
• Payment information: Use of ISO 20022, an international messaging standard which enables rich data to travel with every payment.
• Ubiquitous reach: The RTR will enable widespread payment initiation and receipt, with the ability to reach nearly every account in Canada.
• Robust risk management: Adherence to the Bank of Canada’s Prominent Payment System (PPS) risk management standards to ensure safety and soundness of the RTR.
• Open and risk-based access: All Payments Canada members will be eligible to participate in the RTR provided they meet the risk-based access criteria.
• Transaction transparency: Real-time notification of payment status, providing transparency for participants and end users.

The following sections provide additional key characteristics and requirements of the RTR system.

Real-Time Rail Access Model Overview

As the RTR system is tiered based on settlement, members can apply to participate in the RTR system as a:

• Direct Settlement Participant if they are settling their own payments.
• Settlement Agent if they are settling their own payments and payments on behalf of an indirect settlement participant.
• Indirect Settlement Participant if they use the services of a settlement agent to settle their payments on their behalf.

Payments Canada members that are eligible for RTR participation but choose to leverage the services of an RTR Participant to indirectly send and settle payments in the RTR must make arrangements with an RTR Participant and are considered a Member Non-participant within the RTR framework.

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All entities providing real-time payment services will need to meet specific requirements related to end-user experience, safety and soundness such as:

• Funds availability: Make funds available to customer accounts within 60 seconds.
• Recourse, errors and exceptions handling: Ensure appropriate dispute resolution, and exceptions handling processes and procedures are in place.
• Fraud management: Ensure fraud management tools, procedures, and fraud reporting mechanisms are in place.
• Responsibility for service providers: Ensure that any entity that enters into an agreement with a service provider for the performance of an activity or function is responsible for ensuring that the activity or function is carried out by the service provider in accordance with RTR By-law and rules.
• Incident notification: Responsibility for notifying of any operational incidents affecting the entities’ ability to send and receive payments.

An additional requirement, Direct Settlement Participants and Indirect Settlement Participants must be able to receive payments in the RTR Exchange.

RTR participation types and relevant requirements

The sections below provide high level requirements that Participants must meet. Entities interested in RTR participation can reach out to Payments Canada to receive more detailed participant requirement documentation and information.

Direct Settlement Participant

Payments Canada members intending to become a Direct Settlement Participant must provide Payments Canada with a completed application, and satisfy the following RTR By-law and rules including:

• The applicant must demonstrate that it has established a restricted RTR settlement account with the Bank of Canada.⁴
• The applicant must demonstrate that it meets the RTR operational requirements and has completed the required training.⁵
• The applicant has completed all testing requirements.
• The applicant meets all other applicable technical, security and other requirements set out in the RTR Service Level Description.
  • Includes requirements for any Member Non-participants the applicant might support.
• The applicant must provide Payments Canada with the appropriate RTR payment message routing information.

Settlement Agent

An RTR Direct Settlement Participant intending to become an Settlement Agent must submit an application form that it intends to act as a Settlement Agent and meet specific Settlement Agent requirements in the RTR By-law and rules in addition to the Direct Settlement Participant requirements, including:

• The applicant must demonstrate that it has established an unrestricted RTR settlement account with the Bank of Canada.
• The applicant has completed the training and testing required to become a settlement agent.
• The applicant must notify Payments Canada with the following information regarding their Indirect Settlement Participants and/or Member Non-participants:
  • Name and financial institution number of the Indirect Settlement Participant or Member Non-participant
  • The date on which the Settlement Agent will start acting on behalf of the Indirect Settlement
    Participant or Member Non-participant
  • The payment exchange on which it will be acting on behalf of the Indirect Settlement Participant or Member Non-participant

Settlement Agents will be responsible for managing the settlement risk between themselves and their Indirect Settlement Participants.

Indirect Settlement Participant

Payments Canada members intending to become an Indirect Settlement Participant are required to adhere to certain provisions in the RTR By-law and rules, including:

• Demonstrate that it has made arrangements with a Settlement Agent to clear and settle RTR payments on its behalf and notify Payments Canada.
• Demonstrate that it meets the RTR operational requirements and has completed the required training.⁶
• Complete all testing requirements.
• Meet all other applicable technical, security and other requirements set out in the RTR Service Level Description.
• Provide Payments Canada with the appropriate RTR payment message routing information.

Member Non-participant

The current RTR legal framework requires RTR Participants (Direct Settlement Participant/Settlement Agent) to maintain contractual arrangements with Member Non-participants for the provision of real-time payment exchange, clearing and settlement services.⁷

RTR Participants providing services to Member Non-participants will be required to notify Payments Canada of the following:

• A written agreement from each Member Non-participant for whom it exchanges real-time payments that contains the minimum mandatory elements prescribed in the RTR rules.⁸
• The name of the Member Non-participant and participant identifier for whom they will send or receive RTR payment messages.
• The date on which the Participant will start sending and receiving RTR payments on behalf of the Member Non-participant.

RTR Participants are also required to report to the association the volumes and values sent and received on behalf of Member Non-participants.

RTR financial risk framework

The financial risk framework  is a critical component of the RTR’s broader risk management framework. The financial risk framework is designed to uphold the integrity of the clearing and settlement processes within the RTR while safeguarding participating institutions from financial risks.

The financial risk framework is developed to fully observe the Bank of Canada’s risk management standards for prominent payment systems with the objective to ensure risk controls are established that effectively and efficiently mitigate against financial risks. The RTR financial risk framework provides measures that are intended to mitigate credit, liquidity and settlement risk, as well as establishing controls that provide settlement finality in central bank money.

Risk management

Credit risk

The risk of loss arising from a participant failing to meet settlement obligations. The real-time gross settlement for RTR clearing and settlement ensures that payments are final and irrevocable between participants once they have been settled. Since settlement takes place in real time on a fully funded basis, RTR clearing and settlement does not create credit risk between participants.

Liquidity and settlement risk

As these risks are typically intertwined in payment systems, they are also mitigated in unison, as described below:

• Liquidity risk: This risk arises from a participant when they do not have a sufficient amount of intraday liquidity to settle its payments.
• Settlement risk: This risk closely follows liquidity risk as lack of funds to settle further heightens the risk that a payment does not settle within the required time.

In the context of RTR Clearing and Settlement, sufficient liquidity must be available in a sending participant’s RTR settlement account to settle each individual payment in real-time. If not, the payment will be rejected.

Financial risk controls

RTR participants are provided with several risk control measures to identify, monitor and mitigate financial risks in the RTR payment flow:

• Real-time gross settlement: The real-time gross settlement model is one of the defining pillars of the RTR’s payments flow, ensuring that transactions are settled with finality on an individual, line-by-line basis. The real-time gross settlement model ensures each RTR payment is cleared and settled immediately, and in full between participant settlement accounts.
• Pre-funded model: The pre-funded model complements the real-time gross settlement model as it requires Direct Settlement Participants to maintain sufficient balances within their respective settlement accounts, to ensure that payment obligations, both for themselves and for represented Indirect Settlement Participants can immediately clear and settle.
• Net debit cap: The RTR provides the functionality to Direct Settlement Participants acting as Settlement Agents to manage and monitor credit and liquidity risks related to their represented Indirect Settlement Participants by establishing a Net Debit Cap that limits the Indirect Settlement Participant’s payment activity to a pre-determined threshold.
• Value limits: A value limit per RTR transaction has been set for RTR Clearing and Settlement, fixed at $100,000 CAD⁹ to align with the relevant financial and fraud risks controls participants may be subject to.

Liquidity management

The RTR provides Direct Settlement Participants with tools to monitor and manage their intraday liquidity through the following:

• Real-time monitoring: The RTR provides participants with the functionality to monitor their activities in real-time through the use of a dashboard that will allow for the monitoring of:
  • Financial status of settlement account balance from the start of the payment cycle to real-time.
  • Transaction volumes which include the number and value of transactions sent/received.
• Watermarks: As a tool to help participants manage liquidity risk, the RTR Clearing and Settlement will include the ability for Direct Settlement Participants to set lower (a ‘minimum balance’) and upper (a ‘maximum balance’) settlement account balance watermarks together with their reset thresholds.
• Funding/defunding: Direct Settlement Participants will be required to fund their RTR settlement account with sufficient liquidity to support the continuous settlement of RTR payments. Participants will have the functionality to fund or defund their RTR settlement account using Canada’s high-value payment system, Lynx. Participants who do not have their own Lynx settlement account will have the flexibility to establish settlement arrangements with Lynx participants, enabling them to conduct their funding and defunding activities without direct access to Lynx. Funding and defunding requests are not subject to the RTR value limit.
• Participant-to-Participant transfers: The Participant-to-Participant transfers provide the ability for two Participants to initiate and receive liquidity transfers through the RTR Clearing and Settlement portal between their respective RTR settlement accounts. This functionality will be available 24/7, but is expected to be leveraged when the primary funding/defunding process is unavailable, either due to Lynx being closed or outside of funding cut-off times defined by the Bank. There is no value limit placed on participant to participant transfers and participants lending funds are entitled to claim interest compensation from the borrowing Direct Settlement Participant.

RTR Exchange

The RTR Exchange facilitates the real-time exchange of payment messages between RTR Participants. In order for the RTR Exchange to validate and accept RTR payment messages being sent, Participants must meet the following payment message specifications:

• ISO 20022 message specifications, and;
• RTR Exchange API specifications.

Following receipt of the payment, receiving Participants must send a payment status acceptance message to the RTR Exchange confirming the acceptance or the rejection of the payment. Once this is complete, the RTR Exchange will generate and send a payment outcome report to the sending participant indicating that the payment will or will not be settled. In the case of payment acceptance, the funds will be reserved from the Participant’s RTR settlement account. RTR payment messages submitted to the RTR Exchange are irrevocable and cannot be cancelled by the sending Participant.

Payments successfully settled must have funds made available to the customer within 60 seconds from the receiving Participants’ receipt of the payment. Any data included within the RTR payment message must be made available to the payee unless the payee specifies otherwise.

RTR Exchange capabilities

Connection Service Providers

A Connection Service Provider connects a participant to the RTR Exchange and facilitates the exchange of RTR payment messages with the RTR Exchange. A participant can either connect directly to the RTR Exchange, or use a connection service provider.

A Connection Service Provider must:

• use Payments Canada’s API gateway(s);
• leverage ISO 20022 message specifications, in addition to API specifications and other RTR ISO 20022 requirements;
• adhere to other technical, connectivity, and testing requirements in the RTR Service Level Description and the RTR CSP Onboarding Guide;
• comply with relevant Payments Canada by-laws and rules; and
• provide contact information for support personnel.

Participants who wish to use a Connection Service Provider to connect to the RTR Exchange must ensure the following requirements are satisfied:

• The participant must register the connection service provider with Payments Canada; and
• The participant must ensure that the activity or function carried out by the service provider is in accordance with the RTR legal framework.

Competitive Services

A Competitive Service, sometimes referred to as an overlay service, is an optional payment scheme, product, or service (other than the service of a Connection Service Provider) identified in the RTR Payment Message that supports the processing of an RTR Payment Message. Competitive Services provide additional services to participants such as email-based routing, payee verification and other payment functions.

Participants who wish to offer Competitive Services must ensure the following requirements are satisfied:

• The Participant must register the Competitive Service with Payments Canada; and
• The Participant must ensure that the activity or function carried out by the service provider is in accordance with the RTR legal framework.

Supporting the domestic leg of international transactions

The RTR will have the capability to support the domestic leg of international transactions. RTR Payment Messages will have the capability to include payment related information from other jurisdictions that are deemed as necessary information required for Receiving Participants to meet reporting requirements. Through established banking channels, the foreign bank initiates a payment that is compliant with global standards for cross-border payments. The RTR Sending Participant will use the RTR to send the domestic leg of the transaction to the payee.

RTR Clearing and Settlement

The RTR Clearing and Settlement component facilitates the clearing and settlement of payments that have been exchanged on the RTR Exchange, third-party exchanges and P2P transfers.

Only payments that meet the following payment message format and requirements will be settled in the RTR Clearing and Settlement:

• The amount of the payment must not exceed the value limit of CAD $100,000.¹⁰
• Sufficient funds must be contained within the Participant’s settlement account for the payment to be settled.
• In the case of a Settlement Agent, the settlement of the payment must not cause the indirect Settlement Participant’s net position to fall below the net debit cap set by the settlement agent.

Third Party Exchange

A Third Party Exchange is a payment exchange that is approved to send payments to the RTR Clearing and Settlement. These third-party exchanges are not required to operate in real-time, and will not have to follow the requirements established for the RTR Exchange. RTR Third Party Exchanges may maintain their own rules regarding message exchange and must ensure that their rules do not conflict with the RTR Clearing and Settlement requirements. Third Party Exchanges must meet the RTR Clearing and Settlement rule requirements and are subject to the RTR Financial Risk Framework.

Third-party exchange providers wishing to connect to the RTR Clearing and Settlement infrastructure must ensure the following requirements are satisfied:

• Must be registered with Payments Canada;
• Must meet contractual arrangements between Payments Canada and the Third Party Exchange.

RTR compliance overview

Member compliance framework

Participants must comply with the requirements set out in the RTR By-law and rules. The member compliance framework provides a high-level overview of the member compliance requirements, monitoring and reporting activities. Participant requirements will be outlined in the RTR By-law, rules and supporting documentation.

To ensure that participants are complying with the requirements, monitoring activities will be performed by Payments Canada. The observations from the monitoring activities are reported on a quarterly and annual basis to the Bank of Canada, members and Payments Canada’s Board of Directors.

Risk-based approach to compliance

Payments Canada uses a risk-based approach to compliance, meaning that the actions to address potential contraventions are proportional to the impact of the potential contravention on the safety and soundness of its system, its impact on other members, or its impact on Payments Canada.

Compliance escalations

A number of compliance escalations are available to Payments Canada in the case of alleged contraventions by members.

In the case of an alleged contravention of requirements, Payments Canada’s first step would be to contact the member alleged to be in contravention to request further information, evidence or a meeting to discuss.

Under Canadian Payments Association By-law No. 6 — Compliance¹¹, an investigation of an alleged contravention may be initiated by the President of Payments Canada or by a member filing a complaint. Following an investigation, if the President or a compliance panel determines there has been a contravention, the President or compliance panel, as the case may be, may take one or more of the actions listed in section 16 of CPA By-law No. 6 - Compliance, including ordering that the member pay a penalty.

Participant suspension

The RTR By-law provides that in certain pre-determined circumstances, the President must, and in other situations may, suspend a Participant’s permission to participate in the RTR system.

The circumstances where the President may suspend are:

• Exceptional circumstances: If a federal or provincial regulatory or supervisory body makes a declaration that the participant is considered to be no longer viable or that it is unable to meet its liabilities as they become due and further participation could adversely affect the efficiency, safety, or soundness of the RTR system.
• Other: Includes reasons such as:
  • If the Indirect Settlement Participant does not have a Settlement Agent;
  • If the Participant no longer meets the RTR Participation requirements; or
  • If the Participant has not paid applicable fees.

If the Direct Settlement Participant or Settlement Agent no longer has access to their RTR settlement account from the Bank of Canada, their permission to participate in the RTR system must be suspended.

Participant reinstatement

The Participant whose permission to participate in the RTR system is suspended or revoked may submit an application to the President to have their permission to participate reinstated. The President must reinstate the permission or approval if the application demonstrates that the circumstances giving rise to the suspension or revocation no longer exist.

The President may refuse to approve the application for reinstatement. The Participant or member may appeal the decision to the board in writing within 30 calendar days of receipt of the non-approval decision.

Member and system incidents

There are two types of member incidents as currently defined in the RTR rules:

Severity 1: An incident where a Participant’s RTR-related services are affected in a way that threatens or harms the RTR system, including a cyber attack on a Participant’s system or service or other large-scale Participant incidents.

Severity 2: An incident where a Participant is unable to exchange, clear or settle RTR Payment Messages or make the funds available in accordance with the RTR rules but that does not threaten or harm the RTR system.

Incident notification requirements

In the case of an incident, a Participant is required to notify the RTR Payment Operation Centre by phone immediately, and in any event no later than five (5) minutes upon determining that an incident has occurred. A participant must submit a completed incident report form to Payments Canada within 10 business days of the incident.

Payments Canada staff may request further information upon receipt and review of the completed Participant incident report form. Additionally, Payments Canada will host an internal monthly meeting to review the preceding month’s RTR incidents, which may lead to further follow up with Participants.

Emergency conditions

Emergency conditions affect the operation of the RTR system, the RTR system application or its infrastructure, or the overall safety, soundness and efficiency of the RTR system.

The President may, with prior notice to the Bank of Canada and in accordance with the procedures set out in the rules, take certain actions to ensure the safe and efficient operation of the RTR system, if any of the following occur:

1. Communications between the RTR system and a Participant are interrupted;
2. The ability of the RTR system to receive, send or otherwise process Payment Messages or to clear and settle RTR payment obligations is impaired; or
3. The safe and efficient operation of the RTR system is placed into question or any other emergency affects its operations.

In response to an emergency situation, the President may direct Participants to take certain action including, but not limited to:

• Not sending RTR Payment Messages; 
• Not sending Settlement Instructions to RTR Clearing and Settlement; and
• To take any other action that may be necessary to ensure the safe and efficient operation of the system or to ensure the continued processing of payment messages or clearance and settlement of RTR payment obligations.

RTR exceptions and returns

The RTR rules outline exception handling and return procedures applicable to RTR Payment Obligations exchanged in the RTR Exchange and settled in RTR Clearing and Settlement.

Exception handling

Payments that are exchanged, cleared and settled in the RTR are final and irrevocable between participants. However, where certain exceptional circumstances exist, a receiving participant is relieved of its obligation to make the amount of an RTR Payment Message available to the payee within 60 seconds.

These exceptional circumstances include:

1. Errors: The RTR Payment Message is a duplicate, or it contains an error or omission.
2. Foreign currency amount: The RTR Payment Message identifies the payee by a foreign currency (non-Canadian dollar) account number and chooses not to convert the amount into Canadian dollars.
3. Malicious or harmful content: There are reasonable grounds to believe that the RTR Payment Message contains malicious or harmful content.
4. Events beyond control: Where a Receiving Participant cannot make the amount of the RTR Payment Message available due to a technical malfunction or other event that is beyond the reasonable control of the Participant, directly impairs the functioning of the Participant’s operating systems and procedures.
5. Restrictions: A restriction has been imposed by the Receiving Participant, an order of court or by the Payee.

In these situations (with the exception of events beyond the control of the participant), the Receiving Participant must initiate a return of the amount of the RTR Payment Message with the appropriate return reason, prior to crediting the Payee.

Returns

If a participant has made the funds available to the Payee, the funds are considered final and irrevocable except under one of the following circumstances:

• Errors have occurred;
• It is an unauthorized RTR Payment; 
• It is the result of authorized RTR Fraud; or
• It was made available prior to awareness of certain restrictions (the Payee is deceased, or the amount must be removed in order to comply with law or order of a court).

Where these circumstances have been identified, the Receiving Participant may return the amount of the RTR Payment Message. Such return must be initiated as soon as reasonably practicable in accordance with the return procedures set out in the rules.

For clarity, nothing in the rules precludes any person from exercising its rights or seeking recourse outside of the rules.

Return requests

A Sending Participant may request a return within 60 calendar days from the date the RTR Payment Message was exchanged. A return may be requested by the Payor, due to processing errors, end user errors, authorized RTR Payment Fraud, or Unauthorized RTR Payments.

A Receiving Participant that receives a return request must respond within 10 calendar days of the receipt of the request with its acceptance, rejection, or a request for extension in accordance with the rules. Responses, alongside required information, must be sent to the designated payment returns contact of the requesting Sending Participant. The Receiving Participant may also request additional information.

A Receiving Participant that elects to return the amount as a result of a request by or as authorized by the Payee must initiate a return within 90 calendar days following the receipt of the original RTR Payment Message. The return must be initiated in accordance with procedures agreed upon with the Sending Participant. Information in respect of the original RTR Payment Message and the reason for the return must be provided.

Claims or complaints

Participants must have policies and procedures in place to address claims or complaints relating to processing and end user errors, Unauthorized RTR Payments and Authorized RTR Payment Fraud. The policies and procedures must set out the Participant’s obligations to its clients, including its obligation to investigate claims of exceptions; the obligations of its clients as either Payee or Payor; the circumstances of reimbursement or requesting a return of funds; and processes for escalation.

Participants are required to have procedures for escalating claims and complaints relating to situations of exceptions, where a Payor or Payee disputes the actions or decisions of a Participant. As part of these escalation processes, Participants are required to be a member of an external complaints body. An external complaints body is defined in the RTR rules as an organization that is independent of the Participant that deals with payor and payee complaints relating to exceptions that have been disputed. The Ombudsman for Banking and Investment Services is the external complaints body for many financial institutions in Canada, and is also available to payment service providers. In some cases, this may be the Participant’s regulator. This grants a Participant’s clients with access to an independent dispute resolution service that provides an impartial review of escalated claims or complaints. Participants must ensure that its clients are aware of the escalation procedures.

Each Participant has the obligation to cooperate with other Participants investigations of the exceptions and cooperate to return funds as soon as reasonably practicable, where appropriate.

Participants may investigate claims or complaints initiated by Payors and Payees relating to these exceptions in a timely manner. Subject to the RTR By-law and rules, Participants may take any action it deems appropriate in the circumstances, including submitting a return request and reimbursing the Sending Participant.

In the event of an error, Participants must correct errors promptly upon receipt of notification or discovery of such an error in accordance with the terms and conditions established with the Payor or Payee. Where appropriate, reimbursement may be provided.

RTR fraud management

Payments Canada’s fraud approach

Payments Canada has developed a fraud management strategy to protect Participants and end users from payment fraud. Payments Canada’s fraud policies and rules are grounded in its public policy duties to promote the efficiency, safety and soundness of Canada’s national payment systems. These fraud policies and rules also reflect the Bank of Canada’s risk management standards for PPS. Fraud undermines both system resilience and public trust, and addressing it is central to Payments Canada’s role in maintaining a stable and trusted infrastructure.

Strategic objectives of the RTR fraud strategy

The RTR fraud strategy is based on five strategic pillars:

1. Risk approach: Establish clear thresholds and performance indicators to detect and respond to participant- or system-level fraud risk.
2. Prevention and security: Ensure Participants have strong customer authentication, onboarding controls and fraud detection services.
3. Detection and monitoring: Utilize centralized analytics to assess the risk of RTR transactions in real time.
4. Investigation and response: Enable coordinated action between Participants and system services when fraud is suspected or confirmed.
5. Continuous enhancement: Refine services and rules over time based on feedback, evolving threats and operational experience.

These pillars support a proactive and flexible framework that balances innovation in payments with the need to manage risk.

Third-party fraud service providers

Participants may choose to use a third-party provider for certain services, such as Confirmation of Payee. Participants remain fully responsible for ensuring that any third-party implementation maintains compliance with RTR rules and supports system-wide interoperability.

In the future, the potential for third-party providers to support additional centralized fraud services may be explored, subject to appropriate governance, performance standards and risk management considerations.

Participant fraud requirements

To enable real-time risk detection and fraud prevention, Payments Canada is introducing four centralized services that will be mandatory for all Participants. Each centralized fraud service is designed to provide actionable insights and data to Participants, without replacing or assuming responsibility for fraud decisions. The goal is to enhance existing fraud controls and enable a consistent, system-level approach to identifying and managing risk.

In addition to their own systems, Participants are required to use centralized fraud services as part of their participation in the RTR. These services, Confirmation of Payee, Central Risk List, Central Fraud Analytics and Central Fraud Reporting will be integrated into each Participant’s fraud management processes. Collectively, these services support a coordinated, system-wide approach to identifying, assessing, and responding to fraud risks.

Fraud management requirements are set out in the RTR rules and supporting documents. Payments Canada develops these rules and maintains responsibility for compliance oversight of the RTR rules. All Participants are required to comply with these rules, and updates may be introduced as RTR system needs evolve or threats emerge.

Below details the centralized fraud services and related Participant requirements.

Centralized fraud services

Central Risk List

The Central Risk List is a shared database of account identifiers and fraud-related attributes that have been flagged by Participants as either suspected or confirmed fraud. Contributions to the list are required in near real time from Participants. The list enables Participants to identify high-risk accounts before processing a transaction and supports collective fraud detection across the RTR system.

Participants must manage their contributions to the Central Risk List to maintain the service’s accuracy and effectiveness. This includes:

• Providing accurate, complete, and timely information to ensure the list remains current and useful for all Participants.
• Having internal criteria and decision-making processes for when to flag an account or request changes to existing entries. Having processes is key to maintaining trust in the shared data.
• Proactively maintaining entries, including updating statuses from suspected to confirmed when appropriate, or requesting removal when a fraud case is resolved or disproven.

Central Fraud Analytics

Central Fraud Analytics assesses the likelihood that a payment is fraudulent before it is entered into the RTR system. A numerical score is generated for each payment message, based on inputs such as account history, transaction characteristics, and cross-references with the Central Risk List. Participants are required to receive and assess this score before allowing a transaction to proceed and must report the outcome to Payments Canada. These outcomes help refine and improve the scoring model over time.

Every payment introduced into the RTR must be assessed using Central Fraud Analytics. Participants must:

• Ingest and review the fraud score provided before the payment is entered into the RTR system. This score offers an evidence-based estimate of the payment’s fraud risk.
• Make and document a risk-based decision about whether to approve, reject or investigate further.
• Report the outcome of the decision back to the system so the model can be continuously improved. This feedback loop helps the Central Fraud Analytics evolve in response to new fraud behaviours and improves performance over time.

Central Fraud Reporting

Central Fraud Reporting enables Participants to submit monthly reports summarizing authorized and unauthorized fraud activity. The data supports a system-wide view of fraud trends and provides insights into risks both at the individual participant level and across the entire RTR system. Reports are used to monitor performance against thresholds and identify emerging issues that may require intervention.

The Central Fraud Reporting service provides Payments Canada with essential insights into fraud trends. Participants must:

• Include quantitative data (e.g., volume and value of fraudulent transactions).
• Ensure accuracy and consistency in reporting by implementing internal controls and validation processes.

Confirmation of Payee

Confirmation of Payee helps ensure payments are sent to the intended recipient. When a Payor enters the payee’s name and account information, the system checks whether the name provided matches the name registered with the receiving account. If the names don’t match, or only partially match, the Payor is alerted before the payment goes through. This added layer of verification helps reduce misdirected payments and protects against fraudsters who try to trick people into sending money to the wrong account.

Confirmation of Payee is a fraud prevention service designed to reduce misdirected payments or fraud. Participants must:

• Implement a Confirmation of Payee service to enable account verification for all personal account payments, allowing clients to verify that the recipient’s name matches their intended payee before sending funds.
• Contribute required data to support a Confirmation of Payee service.
• Participants must clearly inform payors of the risks of proceeding when a Confirmation of Payee notification indicates a mismatch or cannot confirm account details. Despite the warning, payors must be given the option to continue with the transaction.

Internal fraud control standards

Participants must maintain strong internal fraud controls that are tailored to their own risk profiles but meet a common minimum standard. These controls include:

• Authenticating payors before sending a payment, using multi-factor authentication or another method with equivalent security. This is essential to ensure that the person authorizing a payment is actually the account holder, reducing the risk of unauthorized RTR payments.
• Having clear internal processes to investigate and respond to fraud indicators, such as a customer reporting account takeover. Participants can leverage Payments Canada’s rules on holding and rejecting payments in exceptional circumstances.
• Regularly reviewing and updating fraud controls to keep up with new risks, technologies, and fraud tactics. Participants are expected to refine their processes over time based on lessons learned and emerging threats.

Reporting and timeliness

In addition to the reporting functionality of the Central Fraud Analytics, participants are required to submit detailed fraud reporting data to Payments Canada on a monthly basis.

• Reports must be submitted by the seventh calendar day of each month and include both authorized and unauthorized fraud, whether successful or attempted.
• The data must reflect transactions initiated by the Participant and any non-participant that they provide services to.
• Reports must be accurate and complete, using the templates and submission processes.

Contracts with non-participants

If a participant provides RTR services to a client institution that is not itself a Participant, it must ensure that the entity complies with RTR fraud rules. Contracts must:

• Include fraud control expectations that align with RTR rules.
• Require participation in centralized services where applicable, including fraud reporting and data sharing.
• Give the RTR participant the right to suspend or terminate service if the entity poses a fraud risk or fails to comply with RTR rules.

Fraud monitoring

In addition to rule compliance, Payments Canada will set specific thresholds to monitor the amount of fraud happening at the transaction level. These thresholds help identify when fraud volumes are getting too high, so that early action can be taken.

Monitoring these levels helps to highlight potential issues, encourages best practices across the RTR system, and supports ongoing efforts to reduce fraud. If a participant’s fraud volumes surpass established thresholds, they may be required to investigate the underlying causes and implement corrective actions. Responses may range from collaborative support and monitoring, to more formal remediation plans, and in some cases, potential restrictions on participation, depending on the severity and persistence of the issue. The intent remains focused on accountability and strengthening the system as a whole.

Next steps

Payments Canada invites members, stakeholders and all other interested parties to provide comments regarding the proposals and the draft RTR By-law by July 2, 2025,  to consultation@payments.ca.

Payments Canada will consider any comments, questions or concerns from responses to the proposals set out in this paper and incorporate appropriate policies into by-law and rule amendments, working with its member and stakeholder committees.

Appendices

Appendix I - Bank of Canada’s RTR settlement account policy

Appendix II - Draft RTR By-law

Appendix III - Draft RTR rules

¹ Please see appendix for the draft RTR By-law.

² Payments Canada consulted on membership expansion in March 2025.

³ Amendments to the Canadian Payments Act will come into force at a time to be determined by the Governor in Council.

⁴  The Bank of Canada has dedicated settlement account policies for the RTR which encompass a set of criteria that determine the types of entities granted a settlement account.  For an overview of the Bank of Canada’s RTR settlement account policies, see Appendix I.

⁵ See the appendices for more detail on the RTR’s operational requirements.

⁶ See Appendix for more detail on the RTR’s operational requirements.

⁷ In the absence of an agreement between an RTR participant and a MNP for whom the participant acts, any payment initiated for the MNP shall be ineligible for exchange, clearing and settlement in the RTR.

⁸ See Appendix for more details on mandatory requirements for MNPs.

⁹ Participants can choose to set lower limits for sending RTR Payment Messages than the current value limit.

¹⁰ Participants can choose to set lower limits for sending RTR Payment Messages than the current value limit.

¹¹ Payments Canada consulted on compliance enhancements in relation to membership expansion in March 2025.