Banks, credit card companies may have to prepare for possible increase in compliance cost, as the Financial Action Task Force (FATF) - the intergovernmental body against money laundering - is considering new disclosure standards for cross-border online transactions, including credit card and wire transfers, Finance Ministry sources told Moneycontrol. 

The proposed changes would involve 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 as well as domestic transactions, a Finance Ministry source said, on request of anonymity.

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

FATF is also examining the implementation of its 'travel rule', to ensure comprehensive tracking of all cross-border online transactions. Currently, credit card transactions only require the disclosure of cardholder's name and country of origin. The new standards would expand this to include more detailed real-time tracking, potentially increasing operational costs for credit card companies and financial institutions.

If adopted, the new standards would necessitate significant legal and procedural adjustments across countries. "The industry feels that the cost of compliance may be a burden on the credit card companies," said the Finance Ministry source. "Countries will need to update their legal frameworks accordingly."

India will be hosting a pivotal discussion regarding these changes in April next year, in Mumbai.

The Reserve Bank of India (RBI) too is actively engaging with industry stakeholders on this matter. "While we support increased transparency, it is crucial that compliance costs do not undermine the speed and efficiency of transactions," the source added. "Balance between transparency and operational viability is essential."

On Financial Inclusion 

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FATF is also considering changes in its standards for financial inclusion accounts, it is learnt. Currently, opening such accounts involves stringent requirements. Developing nations, including India, are advocating for a lower risk categorisation and simplified KYC processes to enhance financial inclusion.

"Financial inclusion is a key area for FATF," said the source. "There is a push for lower risk evaluation and less stringent KYC requirements to facilitate easier account opening for underserved populations."

India is engaging on this matter, in order to balance regulatory demands with practicalities of financial operations, and improving transparency while supporting financial inclusion, the source said.