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Global money laundering and terrorist financing watchdog Financial Action Task Force (FATF) is working towards new norms for higher disclosures by financial institutions, payment aggregators, fintech companies for cross-border payments, involving mainly credit card transactions. An international consultative forum through the FATF platform with participants from the Indian industry, the private sector and regulators of other member countries will be held in April 2025 at Mumbai to discuss this issue amid concerns that this could raise compliance costs for financial institutions and payment companies, officials said.
As of now, credit card companies record identifiable information regarding name of sender and recipient along with country of origin at the time of a transaction. With the new norms, as and when they get adopted by FATF member countries, the payment companies and financial institutions would be required to provide real-time information about credit card transactions to law enforcement agencies. “The discussions have centred around what type of details should come in such credit card transactions. India supports greater transparency and disclosure without hurting the industry. A public consultation will be held at Mumbai in April 2025. The higher disclosure norms have to be formulated in such a manner that there is a balance between compliance and industry’s concerns. The measures taken should not impede the fintech industry,” a senior government official said.
The FATF is looking to revise its Recommendation 16, under which the beneficiary financial institution is supposed to verify the identity of the beneficiary for qualified wire transfers. The intent is to make cross-border payments faster, cheaper, more transparent and inclusive whilst remaining safe and secure; an objective that is part of the G20 Priority Action Plan, an earlier statement in February this year by FATF had stated.
The payment industry is concerned that the new requirements could lead to investment in software and other infrastructure that would result in higher cost of compliance. The global financial crime watchdog FATF’s Travel Rule guidelines require financial institutions and virtual asset service providers to share data about cross-border transactions. Once the revised reporting norms are formally adopted by FATF, all member countries will implement them within the next 2-3 years. Compliance with the new norms would then be measured for each member country at the time of their evaluation under the FATF mutual evaluation process.
The FATF’s fourth round of mutual evaluation for India happened in November 2023. The report of this round would be released on September 18. FATF will highlight the steps taken by India to counter terror financing and money laundering, and flag priority action areas in the ‘mutual evaluation report’. Out of 40 parameters looked into by the FATF, India has received the highest rating in 37 parameters, official sources said.
The FATF plenary held in Singapore between June 26-28 this year had adopted the mutual evaluation report for India, stating that it had achieved “high level of technical compliance” with the requirements of the global money laundering watchdog. The FATF had placed India in the “regular follow-up” category – the highest rating given by the global watchdog and a distinction shared by only four other G20 countries including the UK, France and Italy.
Countries rated under the ‘regular follow-up category’ are required to submit a follow-up report to the FATF once in three years on a voluntary basis.
It had, however, listed a number of measures that are needed to strengthen supervision and implementation of preventive measures in some of the non-financial sectors. The watchdog had said that India needs to address delays relating to concluding money laundering (ML) and terrorist financing (TF) prosecutions and ensure that CFT measures aimed at preventing the non-profit sector from being “abused” for TF are implemented in line with risk-based approach. Official sources said India will work towards the priority areas flagged by FATF but it has to strike a balance between regulation and stifling of charitable institutions that play an important role in the country.