FATF R16 Payment Transparency: What Crypto Firms Must Know
Introduction to FATF R16
What is FATF Recommendation 16?
Why payment transparency matters for crypto
Overview of the Second Public Consultation
Timeline and scope (Feb–Apr 2025)
Key Proposed Revisions to R.16
The second public consultation on FATF R.16, conducted between February and April 2025, resulted in several key revisions aimed at strengthening payment transparency. The finalization of these revisions is expected in June 2025, with phased implementation through 2030. These changes focus on ensuring that the FATF Standards remain technology-neutral and align with the G20 Priority Action Plan to enhance cross-border payments. Key revisions include:
- Structural Changes: The revisions restructure R.16 to improve clarity and eliminate confusion around obligations, particularly in areas such as the card exemption, the de minimis threshold, and domestic vs. cross-border requirements.
- Updates to the Objectives Section: The updated text now explicitly references United Nations Security Council Resolutions related to proliferation financing and fraud, ensuring that the standard covers a broader scope of financial crimes.
- Delineation of the De Minimis Threshold: FATF clarified that the de minimis threshold of USD/EUR 1,000 applies uniformly across different payment methods, while allowing jurisdictions to impose stricter limits based on risk.
- Revised Information Requirements for Cross-Border and Domestic Payments: New requirements ensure that originator and beneficiary details are included and verified for transactions above the de minimis threshold, with structured data formats aligning with ISO 20022 standards.
These revisions reinforce FATF’s “same activity, same risk, same rules” principle, ensuring that compliance obligations apply consistently across traditional banking, fintech, and crypto transactions.
Detailed Breakdown of Proposed Revisions
Virtual Account Numbers
Virtual account numbers (VANs) have become a critical issue in payment transparency, particularly in the context of FATF’s Travel Rule. The updated FATF R.16 proposal emphasizes that financial institutions must ensure that VANs do not obscure the origin of a transaction. Specifically, VANs should clearly indicate the country of the issuing financial institution and the originator’s account details to enhance transparency and facilitate AML/CFT compliance.
A key concern raised during the consultation process was that some VAN structures obscure the actual location of funds, making it difficult for law enforcement and financial intelligence units (FIUs) to track illicit activities. To address this, the revised R.16 requires that:
- Financial institutions issuing or servicing VANs ensure that the linked physical account and jurisdiction are clearly identifiable.
- Financial institutions processing payments using VANs must retain full originator and beneficiary information in compliance with the Travel Rule.
- Payment chains involving VANs must not be used to evade AML/CFT controls by obscuring geographic origins of funds.
This update aligns VAN compliance with traditional bank account transparency requirements, ensuring that fintech payment models adhere to the same AML obligations as legacy financial institutions.
Confirmation of Payee / Verification of Alignment of Information
To mitigate fraud and enhance payment integrity, FATF has introduced the requirement for financial institutions to verify that the beneficiary information provided by the originator aligns with records held by the receiving institution. This is particularly relevant in cross-border transactions and aligns with the Travel Rule’s objective of improving transaction traceability.
Key elements of the updated policy include:
- Mandatory Name & Account Number Verification: Ordering financial institutions must confirm that the beneficiary name and account number match before executing a transaction. This step helps prevent fraud and misdirected payments.
- Implementation of Confirmation of Payee (CoP) Systems: Where applicable, financial institutions must implement CoP verification methods to ensure that transaction details are accurate prior to execution.
- Post-Validation for Cross-Border Transfers: In cases where pre-validation is not possible, beneficiary financial institutions must conduct post-validation to ensure compliance with AML requirements.
- Risk-Based Follow-Up Actions: If misalignment is detected between originator-provided and FI-held beneficiary information, financial institutions must have procedures to handle discrepancies in a risk-sensitive manner.
These enhancements significantly strengthen FATF’s Travel Rule by ensuring that transaction validation occurs at multiple points in the payment process, reducing the risk of fraud and improving trust in financial systems.
Cross-Border Cash Withdrawals
New requirements mandate that financial institutions retain the cardholder’s identity in cross-border ATM withdrawals, improving transaction traceability and reducing illicit financial activities. This aligns with the Travel Rule by ensuring that cross-border cash transactions remain transparent and auditable, preventing bad actors from circumventing AML controls. New requirements mandate that financial institutions retain the cardholder’s identity in cross-border ATM withdrawals, improving transaction traceability and reducing illicit financial activities.
Exemption for Card Payments for Purchase of Goods or Services
While maintaining the exemption for retail purchases, FATF now requires financial institutions to provide issuer/acquirer details upon request, reinforcing transparency while avoiding undue burdens on merchants. By applying the Travel Rule principles, this ensures that card transactions remain traceable when necessary while keeping consumer transactions seamless. While maintaining the exemption for retail purchases, FATF now requires financial institutions to provide issuer/acquirer details upon request, reinforcing transparency while avoiding undue burdens on merchants.
Application of R.16 to Instant Payments
FATF has chosen not to extend the card payment exemption to instant payments due to different risk profiles. However, further monitoring of fast payment systems is planned to ensure AML controls remain effective. This decision underscores the need for continuous oversight to ensure that instant payment systems do not become loopholes for illicit financial activities. FATF has chosen not to extend the card payment exemption to instant payments due to different risk profiles. However, further monitoring of fast payment systems is planned to ensure AML controls remain effective.
De Minimis Threshold
The de minimis threshold of USD/EUR 1,000 remains unchanged but is more clearly defined for both cross-border and domestic transactions, reducing ambiguity while maintaining financial inclusivity. Ensuring this threshold aligns with the Travel Rule prevents small transactions from being exploited as a way to evade AML/CFT compliance. The de minimis threshold of USD/EUR 1,000 remains unchanged but is more clearly defined for both cross-border and domestic transactions, reducing ambiguity while maintaining financial inclusivity.
Information Requirements for Cross-Border Payments or Value Transfers
Updated requirements ensure a balanced approach: mandatory inclusion of name, account number, address, and date of birth for the originator, with financial institutions responsible for verification. This standardization enhances compliance with the Travel Rule by making it easier to track illicit transactions across multiple jurisdictions. Updated requirements ensure a balanced approach: mandatory inclusion of name, account number, address, and date of birth for the originator, with financial institutions responsible for verification.
Domestic Payment and Value Transfers
For domestic transactions, financial institutions can meet compliance by providing account numbers or transaction references, as long as full originator details are available upon request within three business days. By aligning these requirements with the Travel Rule, domestic payments remain transparent while minimizing operational burdens on financial institutions. For domestic transactions, financial institutions can meet compliance by providing account numbers or transaction references, as long as full originator details are available upon request within three business days.
Definition of the Payment Chain
To streamline compliance, FATF defines the start of the payment chain as the financial institution receiving transaction instructions, simplifying AML responsibilities for fintechs and banks. This definition helps ensure a clear responsibility structure, allowing all entities involved in the payment process to maintain compliance with the Travel Rule. To streamline compliance, FATF defines the start of the payment chain as the financial institution receiving transaction instructions, simplifying AML responsibilities for fintechs and banks.
Clarification of Net Settlement & Bundled Transactions
New guidance confirms that intermediary financial institutions are not required to unbundle batch transactions for CDD and sanctions screening, maintaining efficiency while preserving transparency for regulatory authorities. By clarifying these requirements, FATF ensures that bulk transactions remain compliant with the Travel Rule while reducing unnecessary friction in global payment networks. New guidance confirms that intermediary financial institutions are not required to unbundle batch transactions for CDD and sanctions screening, maintaining efficiency while preserving transparency for regulatory authorities.
Other Key Issues Discussed
In addition to the core revisions, FATF addressed several other significant issues raised during the consultation:
- Definition of the Payment Chain: FATF clarified that the payment chain begins with the financial institution receiving transaction instructions, ensuring clear compliance obligations for ordering, intermediary, and beneficiary institutions.
- Origin of Funds Clarification: The revised R.16 ensures that information on the true origin of funds is included in payment messages, preventing bad actors from masking transactions through multi-layered payment chains.
- Net Settlement and Bundled Transactions: FATF provided guidance that financial institutions processing net settlements or bundled transactions are not required to unbundle payments for screening but must ensure that underlying transactions remain traceable.
These clarifications ensure that AML/CFT controls are effectively applied across evolving payment models, without imposing unnecessary burdens on financial institutions.
Impact on Crypto Industry Compliance – ISO 20022 vs IVMS?
Crypto exchanges and VASPs must update transaction monitoring systems to capture new data fields, adapt AML policies, and train staff. Leverage ISO 20022 messaging for structured data flows, ensuring compliance with minimal friction. Address privacy by limiting date-of-birth sharing to originators.
How Compliance Officers Should Respond
Draft your response by:
- Summarizing your firm’s perspective on proportionality and technical feasibility
- Offering concrete drafting suggestions for INR.16 sections 16, 19, and 24
- Highlighting potential impacts on crypto AML operations and financial inclusion
Future Outlook & Content Update Strategy
FATF finalizes R.16 in June 2025, with phased implementation through 2030. Review this guide semi‑annually and update after major FATF publications or ISO 20022 milestones.
Conclusion & Call to Action
Transparency is the cornerstone of FATF’s R.16 revisions, ensuring that all entities in the payment chain—including financial institutions, VASPs, and fintechs—maintain visibility into transaction flows.
FATF defines transparency as the clear identification and accessibility of originator and beneficiary information, preventing illicit actors from exploiting gaps in the system. These revisions reinforce compliance with the Travel Rule, standardizing global AML/CFT measures while balancing innovation and financial inclusion. The FATF needs your expertise to refine R.16.
Respond to the FATF Public Consultation by April 18, 2025, via email to [email protected]. Your input ensures balanced, effective AML standards. The FATF needs your expertise to refine R.16. Respond to the FATF Public Consultation by April 18, 2025, via email to [email protected]. Your input ensures balanced, effective AML standards.
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