On Friday 13th June 2025, FATF approved reforms to its global standards aimed at increasing transparency in cross-border payments, promoting financial inclusion through risk-based strategies, and enhancing global capacities against financial terrorism.
These reforms represent one of the most ambitious updates to the FATF Standards in recent times, reflecting a growing international drive toward targeted and technology-driven strategies for combating financial crimes.
Changes in Payment Transparency
One of the most significant reforms is FATF's endorsement of modifications to Recommendation 16 concerning payment transparency in international transactions.
These amendments, developed in consultation with global banks, payment service providers, civil society organizations, and regulators, seek to enhance the detection of financial crime and the evasion of sanctions by improving the transparency of originator and beneficiary data in cross-border payments over €1,000/USD 1,000. FATF asserts that the updated Recommendation will streamline messaging requirements, thereby enhancing both regulatory compliance and operational effectiveness.
The reforms also mandate the utilization of technology to mitigate fraud and payment errors, with a dual emphasis on safeguarding customers and providing regulatory clarity.
The revised Standard is set to be officially published on June 18, 2025, with financial institutions required to comply by 2030.
FATF highlighted its collaboration with civil society and private sector stakeholders to ensure that the revised regulations align with data protection laws and actively promote, rather than impede, financial inclusion.
Promoting Inclusion Through Enhanced Risk-Based Approaches
Reiterating its dedication to facilitating financial access for underserved populations, FATF has also introduced a series of initiatives to foster financial inclusion.
Following enhancements to Recommendation 1 earlier this year, the organization has now approved updated guidance to assist financial institutions and authorities in applying simplified measures in lower-risk situations.
The new guidance, which is expected to be available later this month, includes practical case studies to address the issue of de-risking—where services are denied to customers or sectors due to perceived AML/CFT risks rather than thorough risk assessments.
Instead, institutions will be encouraged to manage risks more proportionately within the risk-based approach (RBA) framework. This is a component of FATF's broader initiative to integrate approximately 1.4 billion unbanked individuals into the formal financial system.
“By providing institutions with clear, practical tools, FATF is making it more challenging for illicit finance to remain concealed while simultaneously broadening access to financial services for the world's most vulnerable populations,” noted one delegate.
In conjunction with this guidance, a new National Risk Assessment (NRA) Toolkit was approved this week to aid countries in effectively implementing and assessing their RBA frameworks.
FATF also announced modifications to its Mutual Evaluation Methodology to ensure that forthcoming assessments accurately reflect the enhanced focus on risk-based supervision and proportionality.
Protecting Civil Society: Addressing Unintended Consequences
Acknowledging rising concerns about the misapplication of AML/CFT standards—particularly concerning non-profit organizations (NPOs)—FATF has implemented new procedures to mitigate unintended consequences of its Recommendations.
This initiative will build on prior reforms by embedding a process within FATF evaluations to identify and resolve issues related to NPOs, including the misuse of AML/CFT laws to limit civic space.
The new system will function across mutual evaluations and follow-up processes, leveraging both the FATF Secretariat and its Global Network of partner organizations.
These reforms emerge amidst ongoing criticism that certain governments have exploited FATF standards to curtail legitimate civil society activities under the pretext of combating terrorist financing (CTF).
Confronting Emerging Risks: Terrorist and Proliferation Financing
The Plenary also approved a number of significant analytical reports to tackle emerging threats within the global financial system. At the forefront is a comprehensive report on complicated proliferation financing and sanctions evasion schemes, which follows extensive consultations with industry leaders.
The report updates existing guidance on Counter-Proliferation Financing (CPF) and is intended to assist both private sector compliance teams and national authorities.
Also slated for publication is the most thorough global assessment of terrorist financing (TF) risks ever conducted. Drawing from insights provided by over 80 jurisdictions, the report delineates how terrorist actors acquire, store, and transfer funds while identifying anticipated threats over the next three to five years. It is poised to become a foundational resource for both regulators and financial institutions worldwide.
Additionally, FATF sanctioned the sixth targeted update on Virtual Assets and Virtual Asset Service Providers (VASPs).