Executive Summary:
This circular from the Reserve Bank of India (RBI) addresses investments in Payment System Operators (PSOs) from Financial Action Task Force (FATF) non-compliant jurisdictions. It aims to maintain consistency with regulations for investments in Non-Banking Financial Companies (NBFCs). New investments from FATF non-compliant jurisdictions are restricted, while existing investments are handled according to specific guidelines.
Key Points / Main Content:
* **FATF Compliance:**
* FATF identifies jurisdictions with weak AML/CFT measures in two publications: High-Risk Jurisdictions subject to a Call for Action and Jurisdictions under Increased Monitoring.
* Jurisdictions not on these lists are considered FATF compliant.
* **Investments from Non-Compliant Jurisdictions:**
* Investments in PSOs from FATF non-compliant jurisdictions are not treated equally with those from compliant jurisdictions.
* Investors in existing PSOs, whose source jurisdiction becomes FATF non-compliant, can continue or increase investments as per existing regulations to support business continuity.
* New investors from or through FATF non-compliant jurisdictions cannot acquire significant influence in PSOs, whether existing or seeking authorization.
* **Voting Power Restrictions:**
* New investments from FATF non-compliant jurisdictions must account for less than 20% of the PSO's voting power, including potential voting power.
* **Applicability:**
* These instructions apply to entities that have applied or intend to apply for authorization as a PSO under the Payment and Settlement Systems Act, 2007.
Impact Analysis:
* **Existing Payment System Operators (PSOs):**
* Impact: PSOs with existing investors from jurisdictions that become FATF non-compliant must adhere to guidelines for additional investments.
* Action Required: Ensure compliance with regulations for additional investments from FATF non-compliant jurisdictions.
* **New Payment System Operators (PSOs) or Entities Seeking Authorization:**
* Impact: Restrictions on investments from FATF non-compliant jurisdictions will affect potential funding sources and ownership structures.
* Action Required: Ensure that new investments from FATF non-compliant jurisdictions do not exceed the 20% voting power threshold.
* **Investors from FATF Non-Compliant Jurisdictions:**
* Impact: Limited ability to acquire significant influence or more than 20% of voting power in PSOs.
* Action Required: Comply with investment restrictions and ensure investments do not exceed the specified voting power limits.
Key Entities Referenced
Payment Systems in India: Refers to all payment systems operating within the geographical boundaries of India.
Financial Action Task Force (FATF): An international organization that identifies jurisdictions with weak measures to combat money laundering and terrorist financing.
High-Risk Jurisdictions subject to a Call for Action: One of the lists published by the FATF, identifying jurisdictions with significant deficiencies in their AML/CFT regimes.
Jurisdictions under Increased Monitoring: One of the lists published by the FATF, identifying jurisdictions that are actively working with the FATF to address deficiencies in their AML/CFT regimes.
Payment Systems Operators (PSOs): Entities authorized to operate payment systems.
Department of Regulation, Reserve Bank of India: The department within the Reserve Bank of India that issued the initial circular regarding investments in NBFCs from FATF non-compliant jurisdictions.
Payment and Settlement Systems Act, 2007: The Indian legislation under which the directive regarding investments in PSOs is issued.
Mumbai, Maharashtra: City in India where the Central Office of the Reserve Bank of India, Department of Payment and Settlement Systems is located.
भारतीय �रज़वर् बक�
RESERVE BANK OF INDIA
www.rbi.org.in
RBI/2021-22/55
CO.DPSS.AUTH.No.S190/02.27.005/2021-22 June 14, 2021
All entities authorised to operate Payment Systems in India
Madam / Dear Sir,
Investment in Entities from FATF Non-compliant Jurisdictions
A reference is invited to the circular DOR.CO.LIC.CC No.119/03.10.001/2020-21 dated
February 12, 2021 issued by the Department of Regulation, Reserve Bank of India (RBI)
on investment in NBFCs from FATF non-compliant jurisdictions. With a view to maintaining
consistency, the corresponding regulations for investments in Payment Systems Operators
(PSOs) are as follows.
2. The Financial Action Task Force (FATF) periodically identifies jurisdictions with weak
measures to combat money laundering and terrorist financing (AML / CFT) in its following
publications: i) High-Risk Jurisdictions subject to a Call for Action, and ii) Jurisdictions under
Increased Monitoring. A jurisdiction whose name does not appear in these two lists is
referred to as a FATF compliant jurisdiction. Investments in PSOs from FATF non-
compliant jurisdictions shall not be treated at par with that from compliant jurisdictions.
3. Investors in existing PSOs holding their investments prior to the classification of the
source or intermediate jurisdiction/s as FATF non-compliant, may continue with the
investments or bring in additional investments as per extant regulations so as to support
continuity of business in India.
4. New investors from or through non-compliant FATF jurisdictions, whether in existing
PSOs or in entities seeking authorisation as PSOs, are not permitted to acquire, directly or
indirectly, ‘significant influence’ as defined in the applicable accounting standards in the
concerned PSO. In other words, fresh investments (directly or indirectly) from such
भगु तान और �नपटान प्रणाल� �वभाग, क�द्र�य कायालर् य, 14वी मिंजल, क�द्र�य कायालर् य भवन, शह�द भगत �सहं मागर्, फोटर्, मम्ु बई – 400 001
फोन: (91-22) 2264 4995, फैक्स Fax: (91-22) 2265 9566, 2269 1557, ई-मेल: cgmdpssco@rbi.org.in
Department of Payment and settlement Systems, Central Office, 14th Floor, Central Office Building, Shahid Bhagat Singh Road, Fort, Mumbai – 400 001.
Phone: (91-22) 2264 4995, Fax: (91-22) 2265 9566, 2269 1557, Email: cgmdpssco@rbi.org.in
�हंद� आसान है, इसका प्रयोग बढ़ाइए
“चेतावनी: �रज़वर् बक� द्वारा ई-मेल, डाक, एसएमएस या फोन कॉल के ज�रए �कसी क� भी व्यिक्तगत जानकार� जसै े बक� के खाते का ब्यौरा, पासवड र् आ�द नह� मागं ी जाती है।
यह धन रखने या देने का प्रस्ताव भी नह� ं करता है। ऐसे प्रस्ताव� का �कसी भी तर�के से जवाब मत द�िजए।“
Caution: RBI never sends mails, SMSs or makes calls asking for personal information like bank account details, password, etc. It
never keeps or offer funds to anyone. Please do not respond in any manner to such offers.Continuation Sheet…
jurisdictions, in aggregate, should account for less than 20 per cent of the voting power
(including potential1 voting power) of the PSO.
5. The above instructions, as amended from time to time, shall also apply to any entity
that has applied for or that intends to apply for authorisation as a PSO under the Payment
and Settlement Systems Act, 2007.
6. This directive is issued under Section 18 read with Section 10(2) of the Payment
and Settlement Systems Act, 2007.
Yours faithfully,
(P. Vasudevan)
Chief General Manager
1 Potential voting power could arise from instruments that are convertible into equity, other instruments with
contingent voting rights, contractual arrangements, etc., that grant investors voting rights (including contingent voting
rights) in the future. In such cases, it should be ensured that new investments from FATF non-compliant jurisdictions
are less than both (i) 20 per cent of the existing voting powers, and (ii) 20 per cent of existing and potential voting
powers assuming those potential voting rights have materialised.
| Reserve Bank of India |DPSS| Central Office | 2