Higher compliance costs might be in the offing for credit card companies and payment aggregators enabling cross-border transactions as global watchdog Financial Action Task Force is set to consider enhanced disclosures for such transactions.
The FATF is currently discussing enhanced disclosures under Recommendation 16, which particularly focuses on credit card transactions, according to officials in the Finance Ministry. The idea is to make identifiable information available to investigative agencies in real-time about the senders and receivers of such transactions. The change in disclosures could impact international as well as domestic transactions.
Currently as well, the name and country of origin are required to be disclosed, but the changes could make it real-time. A travel rule is already applicable on payment gateways and card companies, which requires financial institutions to share certain information with each other when funds are transferred. The current debate is on additional disclosures and making it a global rule under the FATF.
However, the threshold of such transactions is something that countries can take a call on, according to sources.
Companies have also been consulted for the changes, and have expressed concerns such as higher cost of compliance and reduction of ease and speed of such transactions. However, on a global forum such as FATF, India is more in favour of transparency, hoping that it will bring in structural efficiency but is also cognisant that compliance shouldn’t impede the ease and speed.
Concerns such as change of software and cost of compliance to be borne by the industry have led to the matter being deferred to further discussions. A public consultation, with participation from Indian banks has also happened in Vienna. Another such consultation is scheduled for April 2025 in Mumbai, with the support of the Reserve Bank of India. The banking regulator is also involving stakeholders and discussing the possibility of such a change.
It is learnt that FATF is also considering reducing KYC burden and account opening norms on low-risk account holders, such as Jan Dhan account holders. Developing nations including India are actively pushing for lower risk-standards for low-risk people to boost financial inclusion, especially in the Global South.
FATF will also release the Mutual Evaluation Report for India on Sept. 19, which will determine how the country is placed in terms credibility as a financially stable nation. India’s MER was adapted in June 2024 Plenary of FATF in Singapore, which stated that India has reached a high level of technical compliance with the FATF requirements.
On Sept. 19, further details about India's progress with respect to FATF recommendations on money laundering, terror financing, use of financial intelligence and counter-proliferation financing measures will be discussed.
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