Potential Rise in Costs for Credit Card Companies Due to New FATF Disclosure Norms
Credit card companies and payment aggregators might face increased operational costs as the Financial Action Task Force (FATF) considers implementing stricter disclosure norms for online wire transactions, particularly cross-border transactions including those made through credit cards. This update, reported by sources in the Finance Ministry, suggests that current disclosure requirements—which only include the cardholder’s name and country of origin—might soon be expanded to require more detailed real-time tracking.
What’s Changing?
The FATF is contemplating enhancements to its ‘travel rule,’ which would mandate more comprehensive tracking of cross-border online transactions. These new standards would require credit card companies and financial institutions to provide detailed information about the originator and beneficiary of transactions. This could potentially lead to higher operational costs due to the need for significant legal and procedural adjustments across different countries.
Cost of Compliance
If these new standards are adopted, credit card companies may face increased compliance costs. The Finance Ministry source noted that while the industry supports greater transparency, there are concerns that the costs of compliance could negatively impact the efficiency and speed of transactions. The Reserve Bank of India (RBI) is actively engaging with industry stakeholders to address these concerns.
Public Consultation
India will host a public consultation in April next year to discuss these proposed changes. The focus will be on enhanced disclosure under Recommendation 16 (Rec 16), which aims to ensure that financial institutions provide accurate information on wire transfers and related messages. The recommendation also emphasizes the importance of monitoring transactions to detect and address those lacking necessary information and taking appropriate measures to prevent transactions involving designated individuals or entities related to terrorism and terrorist financing.
Balancing Transparency and Business Ease
India is committed to enhancing transparency while ensuring that these measures do not overly burden the fintech industry or impede the ease of doing business. The goal is to strike a balance between increased transparency and maintaining a smooth operational environment for businesses.
FATF Report on India
On September 19, the FATF will release its ‘mutual evaluation report’ for India. This report will assess India’s efforts in combating terror financing and money laundering and will identify areas requiring improvement. The report, which was adopted in June, placed India in the top-ranking ‘regular follow-up’ category, alongside countries like the UK, France, Italy, and Kazakhstan. India received the highest rating in 37 out of 40 parameters assessed by the FATF.
The upcoming report will outline priority action areas, with most parameters expected to receive a positive rating, though some areas may highlight the need for further improvements.
-
-
-
-
-
-
-
-
-
-
