India Pushes FATF to Ease Compliance Requirements for UPI Cross-Border Payments

India is urging the Financial Action Task Force (FATF), the global watchdog on money laundering, to ease compliance requirements for cross-border transactions conducted through its domestic payment system, according to multiple sources familiar with the discussions.

The Unified Payment Interface (UPI), which was launched in 2016, has grown significantly, accounting for 83% of India’s digital payments volume in 2024, compared to 34% in 2019. Dominating the domestic retail payments sector, the Indian government now seeks to expand its use internationally, allowing Indian travelers to make payments abroad more seamlessly. This expansion could not only create a more competitive global cross-border payments market but also increase the adoption of India’s homegrown system.

However, regulatory compliance requirements for smaller cross-border transactions have hindered UPI’s international expansion, sources revealed. These rules do not apply to transactions conducted through established networks such as Visa, Mastercard, and SWIFT, creating an uneven playing field.

Government officials raised concerns over these requirements at an FATF conference in Mumbai this week, according to two sources who requested anonymity due to their lack of authorization to speak to the media. The FATF, India’s central bank, and the federal finance ministry did not respond to requests for comment. Similarly, Visa and Mastercard have not provided any statements regarding the issue.

A final decision will depend on whether FATF member countries can reach a consensus following the public consultation period, a third source familiar with the discussions explained. The FATF is currently holding a public consultation on its “travel rule,” which mandates financial institutions to collect, store, and share details of both the sender and recipient of cross-border payments. The consultation is set to remain open until April 18.

Currently, the existing global anti-money laundering regulations appear to be more favorable towards traditional card networks and payment systems operating through SWIFT, all three sources indicated. During the FATF gathering, India’s Central Bank Governor Sanjay Malhotra remarked that “it would be desirable to make the (FATF’s) travel rule technology-neutral,” though he refrained from directly referencing UPI in his statement.

India has so far signed agreements with seven countries, including France and Singapore, allowing merchants in those nations to accept UPI payments.

By fLEXI tEAM