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The Financial Action Task Force (FATF) has revised its proposals on payment transparency following extensive industry feedback, refining key aspects such as privacy and transparency.
The consultation, launched in February 2024, aimed to modernise Recommendation 16 (R.16) to address evolving payment structures, including fintech innovations and virtual assets.
Although FATF’s proposals remain focused on improving financial transparency, the latest updates reflect industry concerns, and attempt to balance out objectives related to anti-money laundering and counter-terrorism financing (AML/CTF) with practical implementation challenges.
“FATF welcomes further views on the revised proposals, including both general comments and specific suggestions for how the proposals can be further refined, or clarified,” says the second consultation, which is open until April 18, 2025.
Identification issues
One of the key issues raised in the consultation is name-check rules.
The 2024 consultation included proposals requiring financial institutions to verify whether beneficiary details matched the payment message which faced practical challenges.
FATF has now aligned its approach with existing systems such as the UK’s Confirmation of Payee (CoP) and the EU’s Verification of Payee (VoP).
Beneficiary institutions are now required to verify only the name and account number, either before the payment is processed (pre-validation) or afterward (post-validation).
Concerns were also apparently raised during the consultation over virtual IBANs (vIBANs) potentially obscuring account locations, which has been an ongoing topic in the EU’s Payment Services Regulation (PSR) negotiations.
The revised proposal from FATF shifts responsibility to the issuing or servicing financial institution, ensuring that payment account numbers do not misrepresent the country of origin.
Data protection also featured heavily among concerns, with consultation respondents noting “a reluctance by beneficiaries and beneficiary financial institutions to share personal data”, such as date of birth, due to privacy and data protection concerns.
Respondents warned that “the sharing of certain data elements could potentially not even be permitted under data protection principles and laws”, and raised questions concerning the implications of verification of alignment checks in payment chains involving multiple jurisdictions with varying data protection regimes.
Ultimately, FATF has come to the conclusion that restricting date of birth data to the originator aligns with data protection principles while guaranteeing compliance with relevant regulations.
This should support straight-through processing by reducing false positives, ultimately balancing privacy, security and efficiency in payments.
Scope
The new consultation also addresses scope issues.
For example, in 2024, FATF proposed requiring issuer and acquirer information for card-based purchases to prevent misuse of exemptions for cross-border transfers.
However, industry feedback led to a revision: such information will be available upon request rather than mandated for all transactions. The watchdog also clarified that financial institutions, not technical intermediaries, should access this data.
In addition, FATF decided not to extend the exemption to instant payments, citing different risk profiles, and clarified the definition of “merchant” to maintain market practices without unnecessary changes.
The public consultation responses had also pointed out inconsistencies in implementing the travel rule. Shareholders noted that some crypto-asset service providers had adopted necessary technologies, but others requested guidance on customer identification.
FATF has now decided not to include virtual asset service providers (VASPs) under the recommendation directly. However, it will continue working through the existing framework, including the Travel Rule Recommendation 15 and the Virtual Asset Contact Group (VACG), to support compliance.
Next steps for R.16 will be implementation, which FATF expects to take two to six years, aligning with ISO 20022 adoption and the G20’s 2027 Cross-Border Payments Roadmap.
FATF said it recognises the need for transitional arrangements and will establish a public-private working group to refine guidance, with most requirements expected to take effect by 2030.
