Following 9/11 8 Special Recommendations were initially approved including SRVII on Wire Transfers, under Clarie Lo’s Hong Kong Presidency, which represented the globalisation of the US travel rule, which was a win for US law enforcement who had long wanted to get third counties to agree that cross border payments had to have information as standard that linked funds between senders and receivers, so that illicit funds could also be traced from originator to beneficiary. Whilst cast as a TF requirement, the reality was that whilst it was valid for TF, it had long been something that would help LEA combat AML, in particular, tax evasion.

Later iterations of SRVII and its conversion into R16 in 2012 makes it clear these standards are targeted no longer (and never where) at just TF but also at ML, and is targeted at global data protection and bank secrecy barriers, which restrict AML investigations and not really about  TF concerns, where real barriers could always be overcome.

These 2025 updates are nevertheless necessary as payments (except for alternative underground payments or use of barter systems or cash or value transfers including precious metals and stones smuggling) are the lifeblood of both legitimate commerce and personal income and expense. Illicit activity tries to mimic these transactions and exploit vulnerabilities which have been exacerbated by the fragmentation and innovation in financial services and the digital revolution, affecting both traditional and non traditional finance, since the travel rule was conceived.

FATF has sought to apply the principle of “same activity same risks same rules” to payments/value transfers/messages, and to apply the “risk based approach”. The result is not perfect but is probably close to the best that could be achieved but let’s also consider this against G20/FSB objectives:

G20 /FSB have 4 “Objectives for Cross Border Payments”, to improve: speed, cost, transparency & inclusion. FATF believe changes improve “inclusion” & “transparency”, but haven’t commented on “cost” and “speed”.

Inclusion because:

• DOB can be replaced with “year of birth” if full DOB is not available (for individual originators)
• Full address can be replaced with “town and country” if no recognised postal system exists
• Nevertheless, innovators, particularly in countries with low financial inclusion rates have increased the opportunity for simple peer to peer payments & transfers. The activity based interpretation of payments (therefore within the regulatory ambit) as opposed to the entity based approach may adversely affect future offerings.

Transparency because:

• More information is included than before in payments/value transfers/messages for both originator and beneficiary for FI’s but also for VASPs and for Card transactions.

Speed, because:

• Whilst adding more information usually means slower payments, at least for those caught in traditional filters, mandating structured messaging for payments and value transfers, via e.g ISO 20022, in the longer term this should reduce friction, provided data quality and auto decisioning is effective. In the short term there may be still an increase in friction.

Cost, because:

• On top of already substantial costs to implement ISO20022 by November 2025, FIs, including VASPs & Card Companies will be expected to finance & implement required changes, which may be passed on to originators/beneficiaries which will impact inclusion.