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India is pushing for greater disclosures by credit card companies, fintech firms, and payment aggregators (PAs) at the Financial Action Task Force (FATF) so that the sender and recipient in a cross-border financial transaction can be easily identified and shared with law enforcement agencies.
Separately, the inter-governmental group that sets standards to curb money laundering will release the fourth round of its mutual evaluation report on India on September 18. The FATF in June had adopted the mutual evaluation report on India and placed the country in the “regular follow-up” category—the highest rating given by the global watchdog and a distinction shared by only four other G20 countries.
At present, under the Travel Rules of FATF, data relating to the name of the sender, recipient, and the country of origin is recorded in any cross-border financial transactions. The policy development group (PDG) of the FATF is now deliberating on whether the required information is clearly available to law enforcement agencies or if the information gets masked in any form. Masking of information leads to delays in information sharing by financial institutions involved in cross-border transactions with law enforcement agencies.
“The debate is whether the standards need to be tweaked further so that information can be clearly provided in case of cross-border wire transfers by using credit cards, or payment aggregators or fintech platforms,” a finance ministry official said.
At the PDG of the FATF, India is pitching for greater disclosure norms and transparency without hurting the industry, the official added.
The official said the main concern of credit cards, payment aggregators, or fintech platforms is the cost involved and the software changes required to implement the proposal. “In the case of domestic fund transfers, all the required information is readily available, but the issue arises in the case of cross-border transactions,” he added.
The PDG at the FATF is looking at what is the “identifiable information” and what all data relating to fund transfers should be made available by countries. Once it is approved by the global financial crime watchdog, all member countries would be implementing such disclosure norms within two to three years, the official added.
In the evaluation report by the FATF, India received the highest rating in 37 parameters out of 40 parameters.
“Priority action points will be given by the FATF in the September 19 report,” the official said, adding that on most of the parameters, India would be getting a positive rating in the report, while there would be a few sore points on which FATF has suggested improvements.
While adopting the mutual evaluation report in the FATF plenary held in Singapore between June 26-28, the global crime watchdog hailed India for achieving a high level of technical compliance.
FATF is also considering changes in its standards for financial inclusion accounts. Currently, opening such accounts involves stringent requirements. Developing nations, including India, are advocating for a lower risk categorisation and simplified KYC processes to enhance financial inclusion.
“Financial inclusion is a key area for FATF,” said the official. “There is a push for lower risk evaluation and less stringent KYC requirements to facilitate easier account opening for underserved populations.”
FATF is the global watchdog on money laundering (ML) and terrorist financing (TF). It was formed in 1989. It comprises 32 member countries and two regional bodies such as the Gulf Cooperation Council (GCC) and the European Commission.
India, a full FATF member since 2010, aims to leverage the evaluation to strengthen its international standing, particularly in the context of its growing fintech landscape and global recognition of products like the Unified Payments Interface (UPI) and the Indian rupee.
First Published: Sep 10 2024 | 9:05 PM IS