RBI Governor flags concerns over use of technology for money laundering and terror financing

NEW DELHI: Reserve Bank of India (RBI) Governor Sanjay Malhotra raised concerns on Wednesday over threats from money laundering and terror financing to the national and global financial systems, which are continuously evolving and becoming more sophisticated.

The RBI Governor noted that technological advancements have given strength to money laundering and terror financing activities.

“The threats from money laundering and terror financing to the national and global financial systems are continuously evolving and becoming more sophisticated,” RBI Governor Sanjay Malhotra said, speaking at the Private Sector Collaborative Forum of the Financial Action Task Force (FATF).

“In order to effectively counter these threats, we need to continue the close cooperation among various stakeholders – government agencies, financial entities in both the public and private sectors, civil society, and others,” the RBI Governor said.

The RBI Governor emphasised strengthening the financial system to boost the ecosystem.

He added, “We are determined to further strengthen our financial system to deter and combat illicit financial activities taking into consideration the recommendations made during the evaluation. We will continue to strive for continuous improvement in this regard.”

Malhotra further expressed the need to have laws and regulations, which can prevent only the illegitimate and illicit activities.

He added, “We need to have laws and regulations which, with surgical precision, target only the illegitimate and illicit, rather than use them as blunt tools which unintentionally hurt even the honest.”

The RBI Governor said while implementing the legal framework and regulations, the regulators need to keep in mind the impact on persons and businesses, adding that risk-based approach is recommended in this regard.

Malhotra highlighted the need to reduce the compliance burden, adding that the regulators need to improve the risk assessment models.

“But let us keep in mind that this is only a step forward in reducing compliance burden. Let us appreciate that it is not the ultimate solution, as any risk-based approach is not perfect; it would have false positives and false negatives. We need to continuously refine and improve our risk assessment models to make them robust,” the RBI Governor added.

Malhotra added that the focus has to also be on understanding the latest trends and developments in the financial world that can be exploited by criminals. The regulators need to develop tools and enable frameworks that will allow us to detect suspicious transactions and activities early and take pre-emptive action, the RBI Governor said. (ANI)