NEW DELHI: Costs for credit card companies, payment aggregators and fintech firms are likely to go up as the global Financial Action Task Force (FATF) is planning to increase disclosure requirements, mainly for cross-border transactions.
The FATF, which India is a member of, is planning to enforce the new set of norms to aid investigative agencies with “real-time information” about senders and receivers of funds via these channels. The aim is to reinforce the fight against money laundering and terror funding.
According to official sources, the government has supported the FATF’s move for greater transparency in transactions and more disclosures without compromising privacy, speed of transactions and ease of doing business.
The industry, however, is concerned that the requirement could require additional investment in software and other infrastructure and lead to a rise in compliance cost.
An international consultative forum on the FATF platform will be held in Mumbai in April next year to discuss the matter, the sources said. Besides Indian players and regulators, the private sector and regulators of other member countries will also participate in the meet.
The FATF’s Travel Rule guidelines require financial institutions and virtual asset service providers to share data about cross-border transactions. The Rule requires information with regard to the sender’s name, account number, physical address, and national identity number, etc. This information should be shared with investigative agencies immediately and securely.
Earlier, the government had put in abeyance a plan announced in the Budget FY23 to bring overseas credit card spending above a threshold under the Liberalised Remittance Scheme (LRS) and a 20% tax collected at source (TCS), after created a flutter among Indians seeking to study abroad, and the HNI community.
“India will hold a public consultation on the issue in April next year. India has advocated for more disclosure and transparency in a manner that the Indian fintech sector, other players and financial inclusion do not suffer,” a senior official said.
Compliance cost is a concern for the credit cards, payment aggregators or fintech firms, the official added.
In case of domestic fund transfer, all the required information is readily available, but the issue arises in case of cross-border transactions.
Once the reporting norms are formally adopted by the FATF, all member countries will be implementing them within two-three years. Compliances will be measured when country evaluation happens.
The FATF’s fourth round of Mutual Evaluation Report (MER) for India happened in November 2023. The report of this round will be released on September 19. According to the preliminary report, the FATF has 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.
Under 40 parameters looked into by the FATF, India received the highest rating in 37, sources said.
While adopting the mutual evaluation report in the FATF plenary held in Singapore from June 26-28, the FATF had praised India for achieving a high level of technical compliance. India’s efforts towards anti-money laundering and counter-terrorist financing (CFT) are achieving good results, it said.
The watchdog, however, said it needs to address delays related to the conclusion of money laundering and terrorist financing prosecutions. It also said the country needs to strengthen the supervision and implementation of preventive measures in some of the non-financial sectors. Non-financial sectors include real estate agents, gems and jewellery dealers, casino operators, and chartered accountants and company secretaries.
Source: The Financial Express
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