The finalised update to FATF Recommendation 16 (R.16), announced in June 2025, marks a fundamental re-engineering of the global payment transparency framework. This crucial revision is driven by the G20’s priority to make cross-border payments faster, cheaper, more transparent, and more inclusive, while adapting AML/CFT controls to modern payment systems—which now encompass domestic transfers, digital payments, and Virtual Asset Service Providers (VASPs).
As emphasised in our recent webinar—hosted by Bill Mendenhall (BankCheck) and featuring Ned Conway (Executive Secretary, Wolfsberg Group), Francis Marinier (Moody's/DT4C), and Vincent Gaudel (Lexis-Nexis/DT4C)—the focus must shift from reactive post-transaction monitoring to proactive, preventative controls. The industry’s immediate priority is engaging with the 2026 Guidance, well ahead of the 2030 implementation deadline.
The Road to Compliance: The Critical 2026 Guidance Process
The FATF has committed to an open, collaborative process, acknowledging that the revisions—which include clarifying the scope to follow the principle of ‘same activity, same risk, same rules’—require significant industry preparation.
An Unprecedented Public/Private Partnership
The Explanatory Note confirms the intent to promote implementation through a public-private advisory group (PAG) and the development of the Guidance paper. Ned Conway highlighted that the FATF has demonstrated a "big cultural step forward" by ensuring the Project Team drafting the Guidance includes both private and public sector experts. The project has been broken down by topic with specialists for example on card transactions working on that specific topic. This collaboration aims to ensure the resulting guidance is feasible and technologically sound. The Project Team began its formal sprint in October/November 2025.
Key Milestones on the "Sprint" Timeline
The entire drafting process is scheduled for formal adoption in late 2026:
Now – Feb 2026: Initial Draft Completion—Project Team finalises core structure ahead of the Plenary check-in.
April 2026: Outreach Event (TBC)—A planned event for the private sector to review the Guidance's direction of travel.
June/July 2026: Open Public Consultation—The formal period for the entire industry to provide detailed feedback on the draft text.
October 2026: Formal Adoption of Guidance —The definitive framework is approved, providing the necessary operational detail for national transposition.
Key Issues the Guidance Will Address
The forthcoming Guidance must provide definitive operational and policy clarity on the following critical areas, integrating the FATF’s policy intent with technological necessity:
1. Defining Accountability and Shared Responsibility
Ned Conway emphasised that roles and responsibilities are key. As payments become increasingly intermediated, with the arrival of new players, the focus has to go back to everyone being clear on their roles and responsibilities. The revised R.16 provides clarity on this point.
- The Payment Chain Definition: The FATF adopted the "instruction route" for defining the start of the payment chain (the financial institution which receives the instruction from the customer). The guidance must clarify how this applies to various complex and hybrid payment chains that combine virtual assets and fiat currency.
- The Schemes' Role: The guidance must address the role of Payment Market Infrastructures (PMIs). While the FATF did not directly apply AML/CFT regulation to PMIs (due to complexity and the ISO 20022 transition), the guidance will leverage the Committee on Payments and Market Infrastructures (CPMI) to ensure PMIs support R.16 implementation and enable end-to-end transparency.
- Net Settlement: The FATF confirmed that no unbundling by intermediary FIs is required for net settlement or bundled transactions, a decision welcomed by the industry for striking a balance against imposing new costly requirements.
2. The Data Mandate: Technical Standards and Verification
The revisions enhance data requirements and verification duties, directly addressing the difficulty law enforcement and FIs have in accessing sufficient information to identify suspicious activity, particularly as fraud now constitutes a major predicate crime for money laundering.
- Proportional Information: The FATF revised data requirements based on stakeholder feedback - Vincent Gaudel cited this welcome flexibility as a sign the FATF is genuinely listening:
- Beneficiary Address: Only the country and town name are required, not the full, unverified address, mitigating data protection concerns.
- Date of Birth (DoB): For individual originators, the year of birth only will suffice if the full DoB is unavailable, balancing sanctions screening needs with financial inclusion.
- Flexible Alignment Checks: The guidance will solidify the new, flexible obligation for beneficiary FIs to check the alignment of the beneficiary name and account number. Options include:
- Pre-validation checks (like Confirmation of Payee/CoP or VOP).
- Post-validation checks.
- Holistic ongoing monitoring, which leverages anomalous accounts and transactions.
- Sanctions Screening: A new footnote clarifies that R.16 itself does not require real-time sanctions screening; however, the guidance will address the practical impacts of national TFS regimes that impose this requirement, aiming to minimise disruptive impacts on instant payment systems.
3. Resolving Policy Tensions and Scope Issues
The FATF explicitly sought to avoid imposing rigid standards that would negatively affect financial inclusion or data protection.
- De Minimis Threshold: The FATF clarified the applicability of the de minimis threshold (USD/EUR 1,000) for lower, risk-based requirements on cross-border and domestic transfers. The guidance will address how this relates to other thresholds and actions to minimise financial exclusion risks—a core policy objective. Francis highlighted this as a critical area for the banking community and Ned commented that the issue has a prominent place in FATF due to the simultaneous focus on Recommendation 1.
- Cash Withdrawals: To combat rising typologies (like the example provided in the note) where cards obscure the cardholder’s identity across borders, the FATF introduced a targeted framework for cross-border cash withdrawals. The guidance must clarify how the acquiring FI (servicing the ATM) uses the cardholder name information, which must be provided by the issuer upon request within three business days.
- Card Payments Exemption: The guidance must clarify the scope of the exemption for purchases of goods or services using cards, especially since the term ‘merchant’ was removed to avoid unintended consequences on due diligence practices.
The Call to Action: Prepare Now to Avoid Pitfalls
As Francis Marinier summarised, the financial industry must prioritise action now to avoid fragmented data structures and operational disruptions.
- Proactive Assessment: Banks and PSPs must conduct comprehensive impact assessments, reviewing systems against the expanded scope, which includes domestic transfers and new data requirements.
- Technology Upgrade: Investment must target aligning payment systems with ISO 20022 structured data elements and deploying effective verification tools (VOP, holistic monitoring) to meet verification duties.
- Clarity on Roles: FIs must urgently establish clear internal accountability frameworks and coordinate with PMIs and third parties, recognising that jurisdictional inconsistencies and divergent national adoption timelines remain significant pitfalls.
The October 2026 guidance will be the definitive blueprint. Proactive engagement with the ongoing consultation (Project Team and Public Consultation) is the path to ensuring compliant, resilient, and inclusive payment systems by 2030.
For the more detailed discussion, watch the replay of the "FATF Recommendation 16 Unpacked" webinar.
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