Track fishy transactions, RBI tells payment firms

ET has seen a copy of the letter.

“The regulator wants payment companies to track high-value merchant payments specifically. Also recurring person-to-person payments can be brought under scrutiny,” one of the executives cited above said.

ETtech

Fintech companies like Razorpay, Cashfree, CCAvenue and Mswipe are all regulated payment aggregators while others such as PhonePe and MobiKwik are mobile wallet licence holders.

The central bank has cited concerns raised by the Election Commission of India, the apex body conducting the elections, in its directive.

It also asked payment companies to track dubious transactions and report them to the relevant authorities.

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Cash monitoring

Historically, cash in circulation has gone up during elections. And, the RBI has typically instructed banks to monitor movement of cash.

However, industry insiders said this is one of the first instances where the regulator has called out payment companies and asked them to track digital payment movement.

Given the wide-scale adoption of and popularity of Unified Payments Interface (UPI) and card payments, the regulator wants these channels to be monitored too.

“Merchants can be used as a conduit for unauthorised fund transfer, someone can make a large value payment to a merchant and that person can pay out through smaller cash amounts to multiple people in the locality mainly aimed at influencing voters,” said another top executive at a payment firm on the condition of anonymity.

Using a point of sale (PoS) terminal to convert money from digital to cash is a very common mode of money laundering, the person added.

“For instance if a retailer suddenly processes a Rs 1 lakh transaction, where average ticket size of a transaction typically is around Rs 2,000, that is a red flag,” said another top executive at a payment firm who has also received the letter.

He further said that small-value P2P payments also need to be monitored.

“I have informed my risk team to flag if a specific small-value recurring payment is being made in a particular region around the time of elections, it could be a means to influence voters in a specific area,” the executive added.

As are brought directly under the supervision of the RBI, there is a higher degree of responsibility that is expected from them.

Additionally, with issues around limited know-your-customer (KYC) of the merchants done by payment startups, the regulator is further concerned about the kind of businesses which have access to formal payment channels. In a notification issued last week, the RBI has suggested that payment companies be also mandated to undertake bank grade KYC of their customers before they onboard them for these services.