#19 in the LEI Lightbulb Blog Series – What the Changes to FATF Recommendation 16 Mean for Global Transparency
The Financial Action Task Force (FATF) has published a transformative update to Recommendation 16, setting a new global standard for payment transparency that will equip financial institutions and regulators with powerful information needed to further develop tools for detecting fraud and combating financial crime. One of the most important additions is standardized global identifiers, specifically the LEI, for originators and beneficiaries that are legal persons. In this blog, Clare Rowley, Head of Business Operations at GLEIF, explores what this means for the fight against global financial crime.
Author: Clare Rowley
Date: 2025-08-26
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The FATF Recommendations set out a comprehensive and consistent framework of measures that countries should implement to combat money laundering and terrorist financing, as well as the financing of the proliferation of weapons of mass destruction.
Yet in an increasingly digitalized global economy, a fundamental issue hampering anti-money laundering (AML) and counter-terrorism financing (CTF) efforts has been the collective impact of poor underlying data quality, fragmented data sources and formats, and inconsistent data exchanges. This means that despite precipitous increases in compliance spending by financial institutions, criminals continue to evade detection, with an estimated $2 trillion washed through the global economy each year, according to the United Nations, and high levels of fraud in instant credit transfers.
To combat this challenge, FATF has identified data sharing, data standardization, and advanced analytics as key to effective AML and CTF initiatives across borders. In addition, Project Aurora – an analysis by the Bank for International Settlements (BIS) Innovation Hub – flagged “data quality and standardization of the data identifiers and fields” contained within payment messages as important factors for improving data consistency and usability.
To address this need, the FATF has updated its international requirements on payment transparency – outlined in Recommendation 16 – to better detect and prevent financial crime, while supporting the G20 roadmap for making cross-border payments faster, cheaper, more transparent, and more inclusive.
What is new with Recommendation 16?
FATF Recommendation 16, often referred to as the 'Travel Rule', specifically aims to ensure that basic information on the originator and beneficiary of payments or value transfers is immediately available.
Following two public consultations that elicited over 300 responses from various industry stakeholders, FATF has updated Recommendation 16 to "ensure the consistency of information required in payment messages to build a clearer picture of who is sending and receiving money and help to eliminate fraud and error impacting customers."
Among the changes introduced, the Interpretive Note to Recommendation 16 – which provides implementation guidance for individual countries and jurisdictions – has been updated to explicitly differentiate between originators/beneficiaries that are physical persons and those that are legal persons, with the LEI serving as the key identifier for legal persons in qualifying domestic and cross-border transactions.
Information accompanying all payments or value transfers above the applicable threshold should always contain […] where the originator and/or beneficiary is a legal person, the following information, where this exists: (i) the connected business identifier code (BIC), or (ii) the Legal Entity Identifier (LEI), or (iii) the unique official identifier of the originator and/or beneficiary.
Financial Action Task Force (FATF)
For compliance officers, FATF’s updates introduce new responsibilities, but also a clear opportunity to simplify compliance with the LEI. Watch the video below to see how the LEI empowers compliance teams to strengthen verification, improve efficiency, and build resilience against financial crime.
Explore the Global LEI Index and discover how your organization can streamline verification and strengthen compliance today.
Demonstrating the value of globally standardized identifiers
This is a significant development, as it enables digital retrieval of originator/beneficiary name and address via the LEI and streamlines verification of the beneficiary, another new requirement in FATF Recommendation 16. As already established in the EU Instant Payments Regulation, precise matching using identifiers, specifically the LEI, is an alternative to error-prone algorithmic name and address matching for verification of the beneficiary.
While national identifiers are valuable for navigating national digital infrastructure, they are neither designed nor suited for the sheer complexity of today's cross-border ecosystem. The inclusion of the LEI within the updated recommendation reflects the fundamental role that globally standardized identifiers can play in the fight against financial crime.
As the only established universal entity identifier, adding the LEI as a data attribute in payment messages enables any originator or beneficiary legal entity to be precisely, instantly, and automatically identified across borders and jurisdictions. This addresses inconsistencies in how entities are identified, connects datasets, and captures entity relationships and ownership structures, helping overcome fragmentation and promoting transparency to support a unified, data-driven compliance approach.
The inclusion of another globally standardized identifier – the connected Business Identifier Code (BIC) – within the updated recommendation should also be noted. Importantly, the LEI and BIC exist concurrently and have complementary purposes in identifying parties in transactions. For example, the connected BIC is a specific type of BIC required for parties accessing the SWIFT network, whereas the LEI is accessible to all types of legal entities worldwide.
Global regulatory momentum continues
The updates to Recommendation 16 continue the industry momentum for the inclusion of the LEI within cross-border payment messages, following recognition from leading industry stakeholders, including the BIS' Committee on Payments and Market Infrastructures' (CPMI), The Wolfsberg Group, and the Swift Payment Market Practice Group (PMPG).
The role of the LEI in promoting payment transparency is also increasingly recognized at the jurisdictional level. Take the European Union’s Instant Payment Regulation (IPR), which acknowledges the LEI's ability to support more effective Verification of Payee (also known as Confirmation of Payee or IBAN Name Check). In addition, the LEI is referenced in the EU's recast Transfer of Funds Regulation (TFR) to ensure that transfers are accompanied by key data points on both originating and beneficiary entities, as well as the revised AML directive for identifying and verifying customers and beneficial owners of legal persons.
Elsewhere, the Reserve Bank of India (RBI) has mandated the LEI for all cross-border transactions of ₹50 crore and above. The RBI's 'Payments Vision 2025' also called for greater use of the LEI, as it "facilitates faster tracking of payments, unique identification of parties involved, ensures greater precision and transparency and helps in the adoption of a single identity for an entity across multiple applications."
We are also seeing how the LEI can promote greater trust and transparency beyond the payment sector. For example, the EU's Digital Operational Resilience Act (DORA) has been introduced to enhance the operational resilience of financial entities by improving their ability to manage ICT-related risks. Among the requirements, ICT service providers based in the EU and delivering critical functions for financial entities must now be identified through an active LEI or European Unique Identifier (EUID). And for ICT service providers outside the EU, the LEI is mandated as the sole identifier.
The changes to FATF Recommendation 16 are set to take effect by the end of 2030, which should firmly place the need for greater payment transparency within the sights of all participants across the financial ecosystem.
There is, however, a powerful opportunity for financial institutions to look beyond the immediate demands of short-term compliance. The trend towards openness and accountability is not confined to payments. As digitalization accelerates across the global economy, emerging international and national policies and regulations across various sectors are converging to meet the urgent, unmet need for greater transparency.
The inclusion of the LEI in the updated Recommendation 16 signals that trusted organizational identity will be a key enabler of this transparency. Looking ahead, any business, regardless of size, now has both the motivation and means to empower itself with the ability to be universally recognized across borders and diverse technology infrastructures.
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Clare Rowley is the Head of Business Operations at the Global Legal Entity Identifier Foundation (GLEIF). Prior to working with GLEIF, Ms. Rowley worked at the United States Federal Deposit Insurance Corporation where she led technology initiatives improving bank resolution programs and contributed to research on subprime mortgages. Ms. Rowley is a CFA® charter holder and holds a MS in Predictive Analytics from Northwestern University.
