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Informist, Tuesday, Sep 10, 2024

NEW DELHI – In line with the standards set by the Financial Action Task Force, India is deliberating on stricter disclosure norms for cross-border transactions, including spending through credit cards, a senior finance ministry official said today. These stricter disclosure standards could lead to higher compliance costs, the industry has argued, according to the official.

The changes being planned by the Financial Action Task Force are aimed at curbing instances of money laundering and terror financing. 

"India has been a proponent of enhanced transparency and disclosure," the official said. "However, we are also committed to ensuring that these measures do not unduly hinder the fintech industry or the ease of conducting business." 

The Reserve Bank of India, on behalf of the Indian government, will hold a discussion with credit card-issuing companies and payment aggregators in April to address the concerns of the industry.

The changes under discussion at present could lead to real-time tracking of the 'travel route' for wire transfers, a measure that is currently accessible but not always readily available. This shift could impact both international and domestic transactions, the official said.

Currently, credit card transactions only require the disclosure of the cardholder's name and country of origin. The new standards would expand this to include more details through real-time tracking, potentially increasing operational costs for credit card companies and financial institutions. If adopted, the new standards will also lead to significant legal and procedural changes for all countries bound by the Financial Action Task Force regulations.

The Financial Action Task Force is an intergovernmental organisation established in 1989 as the international watchdog to combat money laundering, terror financing, and other related threats to the integrity of the international financial system. India became its member in 2010.

"While we support increased transparency, it is crucial that compliance costs do not undermine the speed and efficiency of transactions," the official said today. "Balance between transparency and operational viability is essential."

The Financial Action Task Force adopted the 'Mutual Evaluation Report' of India in June and the detailed report will be released on Sep 19. While adopting the report in June, the Financial Action Task Force had 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. "However, improvements are needed to strengthen the supervision and implementation of preventive measures in some of the non-financial sectors, and delays in concluding prosecutions," the report had said. 

Out of the 40 parameters looked into by the Financial Action Task Force, India received the highest rating in 37, according to the official.

Speaking about the benefits of being at the top rung of the Financial Action Task Force's evaluation, the official said it had improved the credibility and reputation of the country as a financially stable and secure nation, making it more attractive for investments. It also increased India's access to international markets and is expected to lower borrowing costs. The good rating could also lead to greater access to international trade by increasing trust in India's trade finance instruments, the official said.

Countries rated under the 'regular follow-up category' are required to submit a follow-up report to the watchdog once in three years on a voluntary basis. Mutual evaluation of any country is a once-in-a-decade event and India's next round of mutual evaluation is likely to be undertaken in 2031, the official said.  End

Reported by Priyasmita Dutta

Edited by Avishek Dutta

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