Costs for credit card companies and payment aggregators may go up as the Financial Action Task Force (FATF) is mulling enhancing disclosure norms for online wire transactions, mainly cross-border transactions, including those taking place through credit cards, said sources in the Finance Ministry on Tuesday.
Currently, credit card transactions only require the disclosure of cardholder’s name and their country of origin. The new standards would expand this to include more detailed real-time tracking, potentially increasing operational costs for credit card companies and financial institutions.
FATF is also examining the implementation of its ‘travel rule’, to ensure comprehensive tracking of all cross-border online transactions.
Cost of compliance
If adopted, the new standards would necessitate significant legal and procedural adjustments across countries. “The industry feels that the cost of compliance may be a burden on the credit card companies,” the source said. Further, he informed that the Reserve Bank of India (RBI) too is actively engaging with industry stakeholders on this matter. “While we support increased transparency, it is crucial that compliance costs do not undermine the speed and efficiency of transactions,” he added.
Ease of doing biz
India will host public consultation on the proposed changes in April, next year. The consultations will focus on enhanced disclosure under ‘Rec 16’ (Recommendation Number 16), which exhorts countries to ensure that financial institutions include required and accurate originator information, and beneficiary information, on wire transfers and related messages, and that the information remains with the wire transfer or related message throughout the payment chain.
Further, the recommendation prescribes countries to ensure that financial institutions monitor wire transfers to detect those which lack required originator and/or beneficiary information, and take appropriate measures. Countries should ensure that, in the context of processing wire transfers, financial institutions take freezing action and should prohibit conducting transactions with designated persons and entities, as per the obligations in the United Nations Securities Council resolutions, pertaining to the prevention and suppression of terrorism and terrorist financing, it adds.
According to sources, the focus will be on enhancing transparency but without compromising on ease of doing business. “India has been a proponent of enhanced transparency and disclosure. However, we are also committed to ensuring that these measures do not unduly hinder the fintech industry or the ease of conducting business,” a source said.
FATF report
Meanwhile, FATF will release the ‘mutual evaluation report’ for India, on September 19, which will highlight the steps taken by India to counter terror financing and money laundering, and flag priority action areas.
The report was adopted in June and it put India in the top-ranking ‘regular follow-up’ along with the UK, France Italy and Kazakhstan. 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. Out of 40 parameters looked into by the FATF, India received the highest rating in 37 parameters, official sources said.
“Priority action points will be given by the FATF in the September 19 report,” sources said, adding that on most of the parameters, India would be getting a positive rating in the report, while there would be few sore points on which FATF has suggested improvements.