Banks use wire transfers as an expeditious method for transferring funds between banks. The Reserve Bank of India (RBI) has several regulations for wire transfers, including transactions occurring within the national boundaries of a country or from one country to another.
As wire transfers do not involve the actual movement of currency, they are considered as a rapid and secure method for transferring value from one location to another. The salient features of a wire transfer transaction are as under:
i) Wire transfer is a transaction carried out on behalf of an originator person (both
natural and legal) through a bank by electronic means to make an amount
of money available to a beneficiary person at a bank. The originator and the beneficiary may be the same person.
ii) Cross-border transfer means any wire transfer where the originator and the beneficiary bank or financial institutions are located in different countries. It may include any chain of wire transfers that has at least one cross-border element.
iii) Domestic wire transfer means any wire transfer where the originator and receiver are located in the same country. It may also include a chain of wire transfers that takes place entirely within the borders of a single country even though the system used to effect the wire transfer may be located in another country.
iv)The originator is the account holder, or where there is no account, the person (natural or legal) that places the order with the bank to perform the wire transfer.
Given that wire transfer is an instantaneous and most preferred route for the transfer of funds across the globe, there is a need to prevent terrorists and other criminals from having unfettered access to wire transfers for moving their funds and for detecting any misuse when it occurs. This can be achieved if basic information on the originator of wire transfers is immediately available to appropriate law enforcement and/or prosecutorial authorities to assist them in detecting, investigating, and prosecuting terrorists or other criminals and tracing their assets. The information can be used by Financial Intelligence Unit – India (FIU-IND) for analysing suspicious or unusual activity and disseminating it as necessary. The originator information can also be put to use by the beneficiary bank to facilitate identification and reporting of suspicious transactions to FIU-IND. Owing to the potential terrorist financing threat posed by small wire transfers, the objective is to be in a position to trace all wire transfers with minimum threshold limits. Accordingly, banks must ensure that all wire transfers are accompanied by the following information:
The RBI requires all wire transfers to include accurate and complete information about the originator and beneficiary. This information includes names, account numbers, addresses, and other details.
India’s central bank, the Reserve Bank of India (RBI), issued updated guidelines on May 4, 2023, to regulated entities (REs), including banks and financial institutions, to ensure that all wire transfers, both domestic and international, contain complete information about the originator and beneficiary. Businesses operating in India should ensure compliance to avoid legal and reputational risks. However, the latest instructions, however, are not intended to cover any transfer that flows from a transaction carried out using a credit card, debit card, or Prepaid Payment Instrument (PPI) for the purchase of goods or services.
“All cross-border wire transfers shall be accompanied by accurate, complete, and meaningful originator and beneficiary information…,” as per the updated instructions in the Master Direction, it said.
Also, domestic wire transfers, where the originator is an account holder of the financial institution [ordering regulated entity (ordering RE)] which initiates the wire transfer and transfers the funds on behalf of the originator, should be accompanied by the originator and beneficiary information, as in the case of cross-border wire transfers.
“Domestic wire transfers of Rs 50,000 and above, where the originator is not an account holder of the ordering RE, shall also be accompanied by the originator and beneficiary information as indicated for cross-border wire transfers,” the RBI said.
The RBI further said REs should make available all the information on the wire transfers to appropriate law enforcement and/or prosecutorial authorities as well as FIU-IND on receiving such requests with appropriate legal provisions.
RBI further said RE processing an intermediary element of a chain of wire transfers should ensure that all originator and beneficiary information accompanying a wire transfer is retained with the transfer.
