Excerpt from FinancialExpress Article, Published on Feb 19, 2024

The financial technology (fintech) landscape in India is experiencing a profound shift, spurred by recent warnings from the Reserve Bank of India (RBI) and increased scrutiny on compliance measures. As the sector expands exponentially, reaching a projected $1.5 trillion by 2030, fintech firms are navigating a complex web of international compliance standards alongside domestic regulations. In a conversation with FinancialExpress.com, Rishi Agrawal, CEO and Co-Founder of Teamlease RegTech, shed light on the impact of international compliance standards such as the General Data Protection Regulation (GDPR) and Anti-Money Laundering (AML) directives on fintech operations in India.

Agrawal emphasized that Indian fintech companies are obligated to adhere to domestic laws and regulations, including robust anti-money laundering measures derived from Financial Action Task Force Guidelines and the Prevention of Money Laundering Act, 2002. Entities must comply with the directives set forth by the Financial Intelligence Unit of India (FIU-IND) and RBI, particularly concerning reporting obligations related to suspicious transactions. Furthermore, fintech firms handling data from the European Union (EU) must ensure compliance with GDPR standards, necessitating stringent data protection measures. With the forthcoming Digital Personal Data Protection Act, 2023 (DPDP Act), domestic regulations are expected to align more closely with international standards, placing similar compliance burdens on fintechs operating in both local and global markets.

Explaining the AML and Counter-Terrorist Financing (CTF) compliance obligations, Agrawal outlined the requirements under the Prevention of Money Laundering Act, 2002. Fintech companies are mandated to conduct Know Your Customer (KYC) procedures for clients, maintain transaction records, and report suspicious activities to authorities. Additionally, they must appoint principal officers and deploy internal mechanisms to detect dubious transactions promptly. To comply with the Income Tax Act, fintechs are obligated to file statements of financial transactions (SFT) and provide comprehensive financial information to regulatory authorities, including annual returns, balance sheets, and GST returns.

As the regulatory landscape evolves, fintech companies face mounting pressures to ensure compliance with both domestic and international standards, underscoring the imperative of robust governance frameworks and diligent oversight in the rapidly expanding digital finance ecosystem.

To delve deeper into this topic, please read the full article in the FinancialExpress.