RBI directs vigilance on high-value transactions to combat financial fraud

To strengthen the oversight of financial transactions and curb illicit activities during the ongoing Lok Sabha elections, the Reserve Bank of India (RBI) has issued directives to payment system operators, instructing them to maintain a vigilant eye on high-value and suspicious transactions.

The RBI has urged banks to heighten their monitoring efforts following reports of misuse of advance payments and letters of credit in goods imports. Concerns were raised after instances of prompt payments were observed soon after the opening of overseas payment accounts, leading to the matter being brought to the attention of lenders in May. A government official emphasised the need for banks to stay vigilant and report any suspicious transactions, highlighting concerns over fraudulent activities associated with advance payments.

Meanwhile, the RBI's directive extends to payment system operators (PSOs), including non-bank entities such as payment gateways, aggregators, and payment apps, as well as major card networks like Visa and Mastercard. These PSOs are urged to keep a close watch on high-value and suspicious transactions to mitigate the risks associated with financial fraud. Lenders are expected to collaborate with regulatory authorities to devise measures aimed at controlling fraudulent transactions, with suggestions including delaying large value advance payments in newly-opened accounts for a period of 3-4 months.

The RBI's directive to payment system operators underscores the importance of vigilance and diligence in monitoring high-value and suspicious transactions, especially during this crucial time of the Lok Sabha elections. By leveraging technology, enhancing regulatory compliance, and fostering collaboration, stakeholders can collectively combat financial crime and safeguard the integrity of the payment ecosystem.