RBI imposes restrictions on new entities from non-FATF compliant jurisdictions

The Reserve Bank on Monday put in place restrictions with respect to investments in payments system operators (PSOs) by new entities from jurisdictions that have weak measures to deal with money laundering and terrorist financing activities.

The Financial Action Task Force (FATF) periodically identifies jurisdictions with weak measures to combat money laundering and terrorist financing activities. Jurisdictions that do not fall under 'high-risk' and 'increased monitoring' categories are considered as FATF-compliant ones.

"Investments in PSOs from FATF non-compliant jurisdictions shall not be treated at par with that from compliant jurisdictions," the Reserve Bank of India (RBI) said in a notification.

According to the central bank, new investors from non-compliant FATF jurisdictions would not be permitted to acquire, directly or indirectly, 'significant influence' in a PSO.

"Fresh investments (directly or indirectly) from such jurisdictions, in aggregate, should account for less than 20 percent of the voting power (including potential voting power) of the PSO," it said, adding that the restriction would be applicable only for new investors.

Further, the RBI noted that investors in existing PSOs holding their investments prior to the classification of the source or intermediate jurisdictions as FATF non-compliant, may continue with the investments. Such investors can also bring in additional investments as per extant regulations so as to support continuity of business in India, it added.

The Financial Action Task Force (FATF) is the global money laundering and terrorist financing watchdog.

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