Tax administrations have a lot of data. And, fortunately, much of it is good and trusted data. 

The challenge is connecting it. And if there is an international component, too often, information about a business or legal entity becomes harder to connect once we cross a border.

A tax administration may have a very clear view of a company operating within its own jurisdiction. Connecting that company to information held abroad can be much more difficult. Even domestically, the same company may appear in a taxpayer register, company registry, payment record, or dataset received from another registration authority. Its name may be abbreviated in one system, translated in another, or replaced by a commercial name elsewhere.  How do we know if is the same company or that it belongs to the same group?

This may sound like a tax administration problem. But it is also a payments problem. The Financial Action Task Force’s (FATF) revised Recommendation 16 offers a practical response through the use of standardized organizational identifiers.

What changed with FATF Recommendation 16?

Recommendation 16, sometimes known as the “Travel Rule”, aims to ensure that basic information about the originator and beneficiary accompanies payments and value transfers.

In June 2025, FATF revised Recommendation 16[1] to strengthen the transparency and consistency of information accompanying cross-border payments. The revised requirements are due to take effect by the end of 2030. The inclusion of organizational identifiers recognizes a basic limitation of payment data: names alone are not always sufficient to identify legal entities consistently and at scale. For payments above the applicable threshold, where the originator or beneficiary is a legal person, the information accompanying the payment should include, where available, a connected Business Identifier Code (BIC), a Legal Entity Identifier (LEI), or another unique official identifier.

At first sight, this may look like another data requirement. But there is a more interesting story behind it.

Why names are not always enough

Names are useful. But they are not useful for machine-to-machine communication. A company name can be abbreviated. It can change. It can appear in different scripts. A business may use a commercial name that differs from its legal name. These variations make automated matching difficult and can produce false matches or leave related records unconnected. Digital, machine-to-machine communication requires identifiers.

The LEI offers another approach. It gives a legal entity a unique and persistent global identifier. That identifier is linked to standardized reference data, including the entity’s legal name and registered address. So the LEI is not simply another field in a payment message. It can be used to retrieve information. It can be checked against trusted reference data. And it can help determine whether information held in different systems refers to the same legal entity.

This is one of the practical lessons of FATF Recommendation 16. Instead of relying only on algorithms to decide whether two slightly different names refer to the same company, a persistent identifier can provide a precise reference point.

Why is this interesting for tax administrations?

Because tax administrations face much the same problem. Tax administrations increasingly work with information from multiple systems and jurisdictions. The challenge is no longer simply whether relevant data exists, but whether it can be connected accurately and efficiently.

For example, when a tax administration receives information about a company from another jurisdiction, it may want to connect that information with its taxpayer register, company information, payment data or other third-party sources. A common identifier can make that task easier.

There is another important point here. This does not require the replacement of Tax Identification Numbers (TINs), which remain fundamental to domestic tax administration. The opportunity is to complement national identifiers with a globally standardized identifier that can connect records across borders.

The opportunity is to complement domestic identifiers with a global identifier that can act as a bridge across borders. In fact, this is already happening and the Global LEI System already supports such connections. In Mexico, for example, LEI records can be linked directly to the Registro Federal de Contribuyentes (RFC) administered by the Servicio de Administración Tributaria (SAT).

Take MOTA-ENGIL MEXICO. Its LEI[2] record identifies the SAT taxpayer register as the registration and validation authority and connects its LEI with its RFC.

Brazil provides another relevant example. The Cadastro Nacional da Pessoa Jurídica (CNPJ), the corporate taxpayer registry administered by the Receita Federal do Brasil, is included in the Global LEI System’s Registration Authorities List. This enables LEI records for Brazilian entities to reference the corresponding national registration authority and identifier.

These examples demonstrate how national and global identifiers can work together. A domestic tax number identifies an entity within a national tax system, while the LEI provides a standardized global reference that can connect the entity with information from other jurisdictions and datasets. The LEI can provide the global reference that helps connect that entity with information coming from elsewhere.

Reusing a standard instead of starting again

There is another useful lesson in FATF Recommendation 16. Regulators and public authorities do not necessarily need to create a new identifier for every reporting or compliance purpose.

The LEI was developed following the 2008 global financial crisis to improve the identification of legal entities participating in financial transactions. FATF Recommendation 16 shows how the same international standard can be reused for a different purpose: payment transparency and financial crime compliance. The rules are different. The policy objectives are different. But the underlying question is often the same: Which legal entity are we talking about?

The same principle is relevant to international tax transparency. The Organisation for Economic Co-operation and Development’s (OECD) Common Reporting Standard (CRS)[3], for example, recognizes the LEI as one of the identifying numbers that may be reported for a Reporting Financial Institution.

Under the OECD’s Crypto-Asset Reporting Framework (CARF), a Reporting Crypto-Asset Service Provider must report an identifying number, which may be an LEI when applicable.

CRS, CARF, and FATF Recommendation 16 serve different purposes. But they illustrate something useful. International standards can be reused across different policy areas when they solve a common problem. And entity identification is one of those problems.

From collecting data to connecting data

The most relevant lesson from FATF Recommendation 16 may be that better compliance does not always require authorities to collect more information. In many cases, progress depends on making existing information easier to identify, connect, and use.

CRS and CARF provide immediate examples, but the broader opportunity extends across international tax cooperation. Linking national identifiers to a common global reference can improve entity resolution across systems without displacing established domestic identifiers.

When a trusted international standard can serve as a bridge between national systems, tax administrations can connect information across borders more easily and with greater confidence.

As the volume of cross-border data continues to grow, this ability to identify the right entity, connect the right records, and make better use of information will become increasingly valuable for tax administrations worldwide.

References:

[1] https://www.fatf-gafi.org/en/publications/Fatfrecommendations/update-Recommendation-16-payment-transparency-june-2025.html

[2] MOTA-ENGIL MEXICO S A P I DE CV LEI record: https://search.gleif.org/#/record/4469000001CWHXAYIO84

[3] Source: https://www.oecd.org/content/dam/oecd/en/publications/reports/2025/04/consolidated-text-of-the-common-reporting-standard-2025_e478bc04/055664b1-en.pdf

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