Need to be mindful that measures are not over-zealous, stifle investment: RBI Governor at FATF event

New anti-money laundering practices are needed with the advent of new tech: RBI Governor at the FATF event

Policy makers needs to be mindful that measures to check money laundering activities are not over-zealous, and do not stifle legitimate investments, banking regulator Reserve Bank of India's Governor Sanjay Malhotra said on March 26, while speaking at a private sector collaborative forum in Mumbai attended by the Financial Action Task Force (FATF) President.

This is the first such event being organised in India.

Governor Malhotra said the central bank continues to make financial systems safe and secure against money laundering and terrorist financing, and India accords a lot of importance to anti-money laundering measures and countering of the financing of terrorism.

The RBI Governor added that technology has enabled greater ease of doing business, at the same time, it has also facilitated and fostered new and very sophisticated means of money laundering and illicit financing. Keeping this mind, there is a need to refine and improve risk assessment models, he added.

In his address, Governor Malhotra urged that regulations should not create unintended barriers to financial inclusion. "We need to be mindful of customer rights and convenience, while fulfilling the due diligence requirements," Malhotra said.

Governor Malhotra said that considering the evolving landscape of money laundering, the regulators will need to continuously augment artificial intelligence (AI) & Machine Learning (ML) risk assessment framework to make appropriate system enhancements.

He also urged central banks to understand the latest trends and developments in the financial world that can be exploited by criminal elements. By understanding this, he said, central banks should develop rules and frameworks which detect suspicious transactions early, and take preemptive action.

Malhotra added that the RBI will continue to work towards fulfilling the commitment to effectively implement the next phase of G20 roadmap towards inclusive cross-border payments by 2027.

"We are all aware that a lot of work needs to be done over there. It's only a matter of time, I think, that cross-border payments will also become much more easier and cost-effective," Malhotra said. To meet the G20 objective of making cross-border payments faster, cheaper, convenient and transparent, it would be desirable to make the travel rules technology neutral, he added.