Costs for credit card companies and payment aggregators could rise as the Financial Action Task Force (FATF) considers tougher disclosure standards for primarily cross-border online wire transactions, including those made through credit cards, Treasury Department sources said on Tuesday.
Currently, credit card transactions only require disclosure of the cardholder’s name and country of origin. The new standard would expand this to more detailed real-time tracking, potentially increasing operational costs for credit card companies and financial institutions.
The FATF is also considering implementing a “travel rule” to ensure comprehensive tracking of cross-border online transactions.
The Cost of Compliance
If adopted, the new standards will require significant legal and procedural adjustments across countries. “The industry feels that compliance costs may be a burden on credit card companies,” the source said. He further said the Reserve Bank of India (RBI) is also in active discussions with industry players on the matter. “While we support greater transparency, it is crucial that compliance costs do not erode the speed and efficiency of transactions,” he added.
Ease of doing business
India will host a public consultation on the proposed changes in April next year. The consultation will focus on strengthening disclosures under “Rec 16” (recommendation number 16), which urges countries to ensure that financial institutions include necessary and accurate source and recipient information in wire transfers and related messages, and that that information is retained with the wire transfer or related message throughout the entire payment chain.
The recommendations further stipulate countries to ensure that financial institutions monitor wire transfers to detect and take appropriate action when transfers lack essential sender and/or recipient information. Countries should also ensure that financial institutions apply freezing measures and prohibit transactions with designated individuals and entities when processing wire transfers, in accordance with their obligations under the United Nations Securities Council Resolution on preventing and suppressing terrorism and terrorist financing, it added.
Sources said the focus will be on increasing transparency but without compromising ease of doing business. “India has been advocating for greater transparency and disclosure. But we are also committed to ensuring that these measures do not unduly hinder the fintech industry or ease of doing business,” the sources said.
FATF Report
Meanwhile, the FATF is scheduled to release its “Mutual Evaluation Report” for India on September 19, which will highlight measures taken by India to combat terrorism financing and money laundering and outline priority areas for action.
The report, adopted in June, placed India in the top tier of “periodic follow-up” along with the UK, France, Italy and Kazakhstan. Countries placed in the “periodic follow-up” category are required to voluntarily submit follow-up reports to the FATF once every three years. Of the 40 criteria examined by the FATF, India received the highest rating in 37, official sources said.
“In its report on September 19, FATF will outline priority action points,” the official said, adding that while India has received a positive assessment in the report on most fronts, there are very few sore points where FATF has suggested improvement.
