IIF Authors

Status: Will be live at 05/03/2024 14:30

IIF Consultation Response to FATF Recommendation 16 on Payment Transparency

The Institute of International Finance (IIF) has submitted a response to the Financial Action Task Force’s (FATF’s) Public Consultation on Recommendation 16 on Payment Transparency (Rec. 16), which seeks to ensure that standards for payments remain relevant in a rapidly evolving global payments ecosystem, with new payment services providers, emerging payment technologies, and updated payment business models.

The global payments ecosystem has changed dramatically from when cross-border payments were mainly effected by banks or occurred through cash. Given there are now many more actors in a far more complex payment value chain, the IIF wholeheartedly supports the FATF’s commitments to transparency, being technology-neutral and to the principle of creating a level playing field through ‘same activity, same risk, same rules.’

Rec. 16 is centered around an important objective – “preventing terrorists and other criminals from having unfettered access to payments or value transfers for moving their funds, and for detecting such misuse when it occurs.” This objective is critical in ensuring that basic information on originators and beneficiaries of payments or value transfers is immediately available: to appropriate law enforcement and/or prosecutorial authorities; to financial intelligence units; and for ordering, intermediary and beneficiary financial institutions to facilitate the identification and reporting of suspicious transactions, and to implement the requirements to take freezing action and comply with prohibitions from conducting transactions with designated persons and entities.

Importantly, the complex technical features of card payments, the significant implications of the proposals for a wide range of stakeholders and the already evident significant concerns that some of the proposals have raised, all merit that the FATF take a careful and considered approach in finalizing its proposals following an extended timeline. Similarly, it is essential that the FATF continue engaging in dialogue with all stakeholders as it develops further proposals for consideration. Given the impact that these changes would have on issuers, banks, other payment service providers and their customers, the IIF encourages FATF to adhere to three principles as it moves forward:

  1. clarity and alignment on the risks to be addressed;
  2. proportionality of mitigation measures to those risks; and
  3. minimization of unintended consequences.

We also encourage the FATF, and its respective member jurisdictions, to conduct a robust assessment of the risks introduced by newer entrants in today’s payment chain and to consider which tools beyond Rec. 16 would be most appropriate to address these risks. As the review of Rec. 16 can impose significant burdens for stakeholders across the payments ecosystem without clearly furthering the objectives of public sector authorities, we call on all relevant stakeholders to engage on this issue with the FATF and its Financial Intelligence Unit members. In our response we provide a number of over-arching considerations for the FATF to consider as they move forward on this work.