IFSCA

Wire Transfers under IFSCA AML/CFT Guidelines 2022

The IFSCA or International Financial services centres authority, issued IFSCA AML/CFT Guidelines, 2022 on 28^th October 2022. Under the said guidelines, it is required that the regulated entity is required to frame policies and measures for the wire transfers. The wire transfer includes ascertaining from where the funds are received and sent. The present article will discuss in detail the provisions relating to conditions for wire transfer and the responsibilities of various intermediaries.

What are Wire Transfers under the guidelines?

The wire transfers^[1] include the transfer of funds to the accounts of the wire transfer originator or wire transfer beneficiary. The provisions of wire transfers shall apply to the regulated entity or bank when it receives or sends funds through wire transfer. Moreover, it shall apply when a debit, credit, charge or prepaid card is used as a payment system in order to effect person-to-person wire transfer.

Further, the certain transfers and settlements which shall not be covered are:

1. The settlements and transfers between a bank and other financial institutions where they are acting on their own behalf as the wire transfer originator and wire transfer beneficiary.
2. The transfer that flows from the transactions carried out using debit, credit, charge or prepaid card for the purchase of goods & services in so far as the debit, credit, charge or prepaid card accompanies all the transfers flowing from the transactions.
3. The transfer and settlements between the entities wherein both the originator & the beneficiary are regulated entities acting on their behalf.

What are the Conditions for Wire Transfers?

The regulated entity shall have to follow the following conditions:

1. The regulated entity shall monitor payment messages to and transactions from high-risk countries or jurisdictions & suspend or reject payment messages related to transactions from these countries or jurisdictions.
2. The regulated entity shall block or reject or freeze the assets of the wire transfer originator or beneficiary immediately if they are terrorist or terrorist entities.
3. Any suspicion in the process of name screening check shall be conveyed to the Principal Officer. Further, the appropriate authority shall make the decision to approve, reject or release suspicious wire transfer.
4. The regulated entity shall not alter, delete or omit information in the payment messages to avoid detection of that information by any other regulated entity in the payment process.

What is the responsibility of Ordering Institutions?

The responsibilities of every bank that is an ordering institution are:

1. Identification and Recovering of Information

Before effecting any wire transfer, the ordering institution shall:

• Identify the wire transfer originator and verify its identity.
• Record the details of the wire transfer so that it can be reconstructed, such as the date of the wire transfer, type and amount of transferred currency and its value date.

2. Cross-Border Wire Transfers below or Equal to USD 1000

A bank that is an ordering institution shall include the following in the message or payment instruction that relates to a wire transfer and where the transferred amount is below or equal to USD 1000:

• Name of the Wire transfer originator
• Wire Transfer originator’s account number
• Name of Wire transfer beneficiary
• Wire transfer beneficiary’s account number

3. Cross-border wire transfers of more than USD 1000

A. Every bank that is an ordering institution shall include the following in the message or payment instruction that relates to a wire transfer and where the transferred amount is more than USD 1000:

• Name and account number of wire transfer originator’s account number
• Name and account number of Wire transfer beneficiary.
• Residential address of the wire transfer originator’s
• Registered and business address and principal place of business.
• Unique Identification Number of wire transfer originator such as birth certificate number, identity card number or passport number. Incorporation or business registration numbers in cases where the originator is not a natural person.
• Wire transfer originator’s date and place of birth, incorporation or registration number.

B. A bank shall ensure that the batch transfer shall contain the following information where several individual cross-border wire transfers take place from a single wire transfer originator  for transmission to the wire transfer beneficiary:

• Wire transfer originator information is required under Point 3 above
• Wire transfer beneficiary information is required under point 3 above.

4. Domestic Wire Transfers

A bank that is an ordering institution shall include the following information in a domestic wire transfer.

A. The following information must be included in the message or payment instruction:

• Name of the wire transfer originator
• Account number of the wire transfer originator
• Residential or registered or business address or place of business of wire transfer originator
• Unique Identification Number of Wire Transfer Originator
• Date and Place of Birth, incorporation or registration of wire transfer originator

B.  Includes only the account number of the wire transfer originator provided that:

• Details allowed the transaction to be traced back to the wire transfer originator and wire transfer beneficiary.
• The ordering institution provides the wire transfer originator information mentioned in point A above within 3 business days upon the request of the beneficiary institution or other relevant authorities.
• The ordering institution provides the wire transfer originator information mentioned in point A above immediately upon the request made by the law enforcement authorities in India.

C. Every information of the wire transfer originator and wire transfer beneficiary shall be collected and documented by the ordering institution failing which they shall not be allowed to execute any wire transfer.

What is the responsibility of the Beneficiary Institution?

The responsibility of beneficiary institutions in wire transfers are as follows:

• The bank that is a beneficiary institution shall identify the wire transfer that lacks the wire transfer originator and wire transfer beneficiary information through post-event monitoring or real-time monitoring.
• The beneficiary institution shall identify and verify the wire transfer beneficiary in a cross-border wire transfer if the identity has not been verified earlier.
• The bank that is a beneficiary institution shall put in place appropriate internal risk-based policies, procedures & control for the following:
  • Execution, Rejection, or Suspension of a wire transfer that lacks wire transfer originator and wire transfer beneficiary information.
  • Any follow-up action.

What is the responsibility of an Intermediary Institution?

The responsibility of an intermediary institution in wire transfers is as follows:

1. The bank, which is an intermediary institution, shall retain all the information of the wire transfer originator and wire transfer beneficiary.

2. In a cross-border wire transfer, if the technical limitations prevent the information on the wire transfer originator and wire transfer beneficiary from remaining with a domestic wire transfer, in that case, the ordering institution shall preserve the record for at least 6 years or the period applicable under laws.

3. The intermediary institution shall put in place appropriate internal risk-based policies, procedures & controls for the following:

• Execution, Rejection, or Suspension of a wire transfer that lacks wire transfer originator and wire transfer beneficiary information.
• Any follow-up action.

Conclusion

The wire transfers policies, measures and controls are framed by the regulated entity in order to ascertain the information of the wire transfer originator and wire transfer beneficiary. The gathering of information helps in maintaining a record of the transaction in a cross-border or domestic wire transfer. The information helps the regulated entity know the source of funds and helps prevent any money laundering or terrorist financing risks. Moreover, the regulated entity must frame parameters that will state the conditions for undertaking any wire transfer.

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