India bats for new disclosure norms for cross-border credit card transactions under FATF

• The Financial Action Task Force (FATF) is working on new disclosure norms for financial institutions, payment aggregators, and fintech companies.
• These norms would primarily target cross-border payments, focusing on credit card transactions.

Consultation Forum in 2025

• A consultative forum under the FATF will be held in April 2025 in India, involving Indian industry participants, private sectors, and regulators from other countries.
• Aim: To discuss the potential impacts of the new norms, which may raise compliance costs for financial institutions and payment companies.

Current and Future Norms

• Presently, credit card companies provide basic information such as the sender's and recipient's names, along with the country of origin.
• However, the proposed norms would require real-time transaction data to be shared with law enforcement agencies.
• India supports transparency while ensuring that the measures do not impede the fintech industry's growth.

Revision of FATF Recommendation 16

• FATF plans to revise its Recommendation 16, which mandates financial institutions to verify the identity of beneficiaries for qualified wire transfers.
• Objective: To make cross-border payments faster, cheaper, more transparent, and inclusive, aligning with the G20 Priority Action Plan.

Industry Concerns and Compliance

• The payment industry fears that implementing these new requirements will necessitate additional investments in software and infrastructure, leading to increased compliance costs.
• Once FATF adopts the revised norms, member countries are expected to implement them over the next 2-3 years.
• Compliance will be evaluated during the FATF mutual evaluation process for each country.

India’s Performance in FATF Mutual Evaluation

• India underwent its fourth round of FATF mutual evaluation in November 2023, with the report set to be released this September.
• India received the highest ratings in 37 out of 40 parameters, showcasing its efforts to combat money laundering and terror financing.

India's Rating and Follow-Up Process

• In June 2023, the FATF plenary in Singapore recognized India's "high level of technical compliance" with FATF requirements.
• India was placed in the "regular follow-up" category, a distinction shared by only a few G20 countries like the UK, France, and Italy.
• Countries in this category submit a follow-up report to the FATF every three years on a voluntary basis.

Areas for Improvement

• Despite India's high rating, FATF noted several areas that require improvement.
• India needs to expedite prosecutions related to money laundering and terrorist financing.
• The FATF also emphasized better supervision in non-financial sectors and the prevention of terrorist financing through non-profit organizations.

Prelims Takeaway

• Financial Action Task Force (FATF)
• G20