At Notabene, we believe compliance shouldn’t come at the expense of innovation. That’s why we’re working closely with global regulators to help shape smarter rules for the future of finance.
Recently, the Financial Action Task Force (FATF) solicited a second round of feedback on proposed revisions to its Recommendation 16 (R16) and the corresponding interpretive note, which covers how financial institutions share information to prevent illicit activity.
On April 15, Notabene’s Regulatory and Compliance team responded with insights based on years of experience helping VASPs comply with the Travel Rule across jurisdictions.
Read our full response here
Here’s a quick breakdown of what’s changing, what it means for the crypto industry, and what we think needs more attention.
Why Requiring Geographic Address is Ineffective
The FATF wants cross-border payments or value transfers above the applicable threshold to always include the originator's and beneficiary's geographic addresses. Notabene raised concerns in both FATF consultations about mandating geographic addresses in originator and beneficiary data.
In our first response, Notabene argued that addresses are unreliable identifiers, difficult to verify, and not useful for sanction screening. Their inclusion raises privacy concerns and could harm financial inclusion, especially in regions without standardized address systems. Notabene proposed removing the address requirement and instead allowing a risk-based approach to selecting identifiers.
In the second feedback round, the FATF introduced flexibility by allowing country and town as alternatives when full addresses aren't available. While this has been seen as an improvement, Notabene maintained that addresses are still problematic, and suggested that the FATF provide further guidance for cases where even town-level data is unavailable. We also recommended considering more reliable, standardized alternatives like phone numbers.
Virtual Account Numbers Can’t Hide the Source
In response to the FATF’s concerns about virtual IBANs and account identifiers, Notabene initially recommended enforcing accurate country designation. The FATF’s revised proposal improves on this by clarifying that account numbers should not obscure the country of fund origin, placing responsibility on the issuing institution.
In our response, Notabene supported this shift, but pushed for a bigger rethink: it’s time to move away from relying solely on account numbers to track money and promote more transparent models like transfer requests. We recommended recognizing solutions like the Transaction Authorization Protocol (TAP), which enables better counterparty identification—especially critical in complex virtual asset transactions. TAP is a decentralized, pre-transaction messaging system that helps identify counterparties before money moves. TAP gives everyone in the payment chain the information they need before a transaction is finalized, reducing fraud and improving transparency.
Pre-Validation is a Must in Crypto Transfers
Once a transaction hits the blockchain, it’s permanent. That’s why we support the FATF’s emphasis on pre-validation measures like verifying beneficiary info before a transfer goes through.
We also recommended that when a receiving institution detects a mismatch, they should notify their counterparty right away. This small change could go a long way in stopping fraudulent or misdirected transactions before they happen.
Defining the Payment Chain from Start to Finish
The FATF’s new definition of a “payment chain” is clearer than before, but we flagged one potential issue: what happens when the first institution receiving a payment instruction isn’t directly connected to the originator?
To mitigate this, Notabene recommended that the FATF provide guidance for complex scenarios, proposing principles to ensure complete information flow. These include requiring message originators to identify all known parties, and for each agent to add any missing identifiers and resolve compliance gaps through collaboration. This would strengthen the integrity of the payment chain across varied transaction structures.
Roadmap to Full Compliance by 2030
We appreciated the FATF’s proposal for a multi-year rollout of the new standards, with a target end date of 2030.
We recommended a phased approach for the crypto industry, focused first on the highest-risk areas (like verifying beneficiary info), and allowing time for organizations to adapt and improve throughout a learning period where good-faith compliance efforts are recognized before enforcing strict technical requirements.
How do FATF Recommendations Affect You?
Notabene welcomed the FATF’s decision to keep VASPs under the existing Regulation 15 framework while updating its interpretive note to reflect R16’s evolving information requirements. This approach ensures continuity while allowing tailored Travel Rule implementation through the Virtual Assets Contact Group (VACG).
To support this process, Notabene recommended using TAP as a testing ground for R16 application in the virtual asset space.
Leading the Future of Compliant Payments
The FATF’s proposed updates to R16 mark a turning point in global financial compliance. While traditional financial institutions may struggle with the transition due to entrenched systems, VASPs and stablecoin PSPs have a clear advantage. Operating on modern, programmable infrastructure, they are not only better equipped to meet evolving regulatory standards, but also to redefine what compliant, cross-border payments can look like in the digital age. By embracing these changes early and building compliance into their core operations, VASPs and stablecoin PSPs can lead the charge toward a more transparent, efficient, and secure global financial system.
At Notabene, we believe that regulation and innovation can go hand in hand, and that compliance tools should make financial services more accessible, not less.
Schedule time for a free consultation with our regulatory experts to learn more about the FATF’s proposed revision to R16, or about Notabene’s TAP solution for counterparty identification.
