India urges FATF to ease compliance for cross-border payments through UPI

India is urging the Financial Action Task Force (FATF), the global body overseeing money-laundering regulations, to ease compliance standards for cross-border payments made through its domestic system, according to multiple sources familiar with the discussions.

The Unified Payment Interface (UPI), introduced in 2016, now controls the majority of India’s domestic retail payments market, accounting for 83% of digital payments in 2024, up from 34% in 2019.

To tap into a growing market and increase competition in the global cross-border payments sector, the government now seeks to encourage more Indians traveling abroad to use its own payments network.

However, compliance limitations for smaller payments, which payments made through networks like Visa, Mastercard, and SWIFT are exempt from, have hindered UPI’s growth for cross-border payments, according to sources.

Two individuals, speaking on condition of anonymity due to their lack of authorization to address the media, said government representatives raised the issue during a FATF session in Mumbai this week.

Emails requesting comment from the Federal Financial Services Task Force, India’s central bank, and the Federal Finance Ministry went unanswered. Requests for comment from Visa and Mastercard were also not responded to.

According to a third source with knowledge of the discussions, reaching an agreement among FATF member nations after the public consultation phase will be necessary for a final decision.

The FATF's "travel rule" mandates financial institutions to gather, retain, and transmit information regarding the originator and recipient of cross-border transfers. The public can submit comments on this rule until April 18.

According to the three sources, international anti-money laundering regulations currently favor card networks and payments made through the SWIFT system.

"It would be desirable to make the (FATF’s) travel rule technology-neutral," said Central Bank Governor Sanjay Malhotra at the FATF meeting, though he did not specifically mention UPI.

To date, India has signed agreements with seven countries, including France and Singapore, allowing retailers to accept UPI payments.