The Financial Action Task Force (FATF) is considering stricter disclosure standards for cross-border online transactions, including credit card and wire transfers. This could lead to higher compliance costs for banks and credit card companies. Let’s break down what this means:
1. New Disclosure Standards for Cross-Border Transactions
- FATF is looking to implement real-time tracking of the ‘travel route’ for wire transfers, a feature currently not always readily available.
- Credit card transactions may also see increased tracking, with more detailed information required beyond just the cardholder’s name and country of origin.
- These changes could apply to both international and domestic transactions.
2. Impact on Compliance Costs
- If the proposed changes are adopted, banks and credit card companies may face higher operational costs due to increased compliance burdens.
- Updating legal and procedural frameworks across countries will also be necessary, potentially affecting the fintech industry’s ease of doing business.
3. India’s Role in Global Discussions
- India has been advocating for enhanced transparency while ensuring these measures don’t hinder fintech growth.
- A pivotal discussion on this matter will be hosted by India in April next year in Mumbai, bringing together global stakeholders to shape the future of financial compliance.
4. Balancing Transparency with Operational Efficiency
- The Reserve Bank of India (RBI) is engaging with industry stakeholders to find a balance between increased transparency and maintaining the speed and efficiency of transactions.
- The key challenge is to implement these standards without imposing excessive burdens on businesses.
5. FATF’s Focus on Financial Inclusion
- FATF is also exploring changes to make opening financial inclusion accounts easier, particularly for underserved populations in developing nations.
- India is advocating for lower risk categorization and simplified KYC processes to boost financial inclusion without compromising regulatory standards.