FATF Recommendation 16: Transparency in payments

Among the purposes of the Financial Action Task Force — FATF — is the issuance and updating of its 40 Recommendations. These recommendations stand as international standards aimed at improving the legal and organizational systems for the prevention of money laundering and terrorist financing.

The FATF Recommendation 16 aims to promote transparency in payments or value transfers, urging financial institutions to include identifying information about both the sender and the beneficiary of a transfer. Likewise, the directive calls on financial institutions to monitor all their payments or value transfers to detect those lacking sufficient information about the originator and the beneficiary.

This Recommendation seeks to ensure that information on the originator and beneficiary of a value transfer is immediately available to:

• law enforcement and tax authorities, to help detect, investigate, and prosecute terrorists and other criminals through transaction tracing;
• financial intelligence units, for the potential analysis of suspicious transactions or unusual activities;
• ordering, intermediary, and beneficiary financial institutions, to facilitate the identification of suspicious transactions and apply asset-freezing measures under UN Security Council Resolutions 1267 — 1999 — or 2745 — 2024 — among others.

This Recommendation has been further developed in an Interpretive Note, which specifies what information is required depending on whether the transaction is a cross-border payment or a domestic value transfer. For cross-border payments, a minimum threshold of 1,000 euros/dollars applies. Below this threshold, the minimum required information includes the name of the originator and the beneficiary, as well as an account number for both parties, or alternatively, a unique transaction reference number.

For cross-border transactions exceeding the minimum threshold, the information mentioned above must be included, along with the originator’s address and the beneficiary’s country and city of residence. If the originator is a natural person, their date of birth must be provided. Conversely, if the originator or beneficiary is a legal person, their unique identifying number must be known.

For domestic value transfers, the minimum threshold is also set at 1,000 euros/dollars, and the minimum required information for transactions below this threshold is equivalent to that required for cross-border transfers. For transfers exceeding this limit, the Recommendation provides two possible approaches:

• Follow the same information criteria applicable to cross-border transfers.
• Allow the ordering financial institution to provide only an account number or a unique transaction identifier, provided it allows the transaction to be traced unequivocally to the originator or beneficiary, and that full information can be made available to the receiving financial institution and competent authorities by other means.