Inaugural Meeting
Summary of Proceedings

Inaugural meeting of Alliance of Reporting Entities in India for AML/CFT (ARIFAC) (August 4, 2023 – New Delhi)


1. ARIFAC is a Private-Private Partnership framework developed after extensive consultations between reporting entities belonging to multiple sectors (Banks, NBFCs, Payment Aggregators, Prepaid Payment Instrument Providers, NPCI etc.) and FIU-INDIA, to deliberate on the objectives, structure, and nature of private-private engagement in the national AML/CFT domain.

2. The inaugural meeting of ARIFAC was attended by 68 entities who participated in a day-long session hosted by Paytm in Delhi on August 4, 2023. In the welcome remarks, Mr. Nakul Jain (MD & CEO and Designated Director Paytm Payment Services Ltd) underscored the need for such private-private information sharing especially in payment industry as the industry is witnessing new typologies and trends relevant for AML/CFT compliance.

3. Shri Vivek Aggarwal, Additional Secretary (Department of Revenue) and Director, FIU-India set the context and laid out the expectations from the REs while engaging with ARIFAC. In his words: 

a) Initiative of ARIFAC represents one of the important components in the fight against ML / TF that complements the initiatives taken in public sector globally under the policy guidance through FATF recommendations. ARIFAC has the potential to support the implementation of the FATF recommendations in a more institutionalized and committed manner. ARIFAC thus can become a contributor to the upcoming FATF mutual evaluation process of India, and take forward the learnings therefrom for institutionalizing at the industry level. It also can set the tone and template for such private-private engagement amongst FATF member countries.

b) The success of ARIFAC rests on its members’ participation and therefore all REs need to contribute financial intelligence through ARIFAC in a meaningful manner. The deliberations at ARIFAC meetings should be mutually beneficial to all the participants of ARIFAC.

c) To support such meaningful exchanges in a safe and trusted manner, FIU-IND will provide access to FINnet 2.0 portal. The portal enables sharing of information using secured channel amongst participants. Further, this will ensure that FIU-IND is aware of the information that is being shared, so that there are no dark spots in the setup and the legal issues are minimized in such private-private information sharing.

d) However, beyond the portal contribution by FIU-IND, ARIFAC needs to set up a working group to frame guidelines for future activities, together with the institutional architecture through which such activities can be undertaken.

e) The functioning of ARIFAC should be organized in a self-sustaining manner, while FIU-IND can consider possible seed funding in the initial period to kick start the initiative.

f) ARIFAC should focus on meaningful information sharing amongst its member entities beyond the content deliberated through private public consultation organized by FIU-IND periodically. ARIFAC should be able to timely sensitize the members and the FIU-IND on developing trends / typologies / best practices relevant for enhancing the AML / CFT frameworks of individual entities and of the whole financial sector of the country.

g) Apart from information sharing, ARIFAC should also focus on capacity building of the member entities, especially those who are newly covered under the AML / CFT framework and those which need support in running AML / CFTs programs in a more robust manner. Towards this end, ARIFAC may look at ethics, qualifications, certifications, and standards for a compliance officer like that of Chartered Accountant or a Company Secretary (which can be a reference benchmark for appointment of AML Compliance Officers going forward). 

4. Ms. Vasud Torsekar, Joint Director, FIU-IND shared the proposed charter of FIU-IND that can be considered by members. In her words:

a) Private-private collaboration is crucial in bridging information gap arising due to multiple entities involved in payment transaction having partial information. A meaningful information sharing facilitates a wholesome view of the typologies of transactions that need attention from financial intelligence / investigation perspective.

b) For this to happen, ARIFAC should not only operate at a central level, but should pick up activities at regional level for facilitating ground-level understanding of emerging trends / typologies and with participation of all entities in a timely manner. Having working groups at regional level organized periodically around themes of various sectors of REs will be one way to make ARIFAC relevance to all REs and scenarios.

c) In the initial period, ARIFAC may also consider leveraging on the support of other established institutes that contribute to capacity building of specific sectors such as: National Institute of Bank Management (NIBM, Pune), Institute for Development and Research in Banking Technology, (IDRBT, Hyderabad), RBI College of Agricultural Banking, Pune, RBI Zonal Training Centers (ZTCs) etc.

d) ARIFAC can also evaluate the meaningful contribution that can be made by other entities outside the REs (such as technology vendors / training firms etc.,). 

5. Mr. Smarak Swain, Director, FATF-Cell, Dept. of Revenue, MoF outlined the key highlights of the upcoming India’s mutual evaluation process of FATF. He provided an overview of the national risk assessment (NRA) exercise carried out and the vulnerabilities / risk categories identified as part of the exercise. He drew the attention of REs to the recent changes introduced in the AML CFT legislation pursuant to the risk assessment exercise, such as the changes in thresholds (from 25% to 10% of shareholding) for obtaining ultimate beneficial ownership requirement. He urged the REs to go through the outcomes of the exercise and thoroughly align their entity-level AML CFT frameworks in line with the national risk assessment. He mentioned that ARIFAC could facilitate this process taking the key highlights of NRA and provide templated manner of addressing the risks through AML CFT policies at individual REs.

6. Shri Manish Kumar Hairat, Additional Director, FIU-IND shared the operational features of the new FINnet 2.0 portal, where REs can share typologies, as part of ARIFAC initiative, in a secured environment. Presence of FIU-IND can facilitate moderation of the process, expedite the information dissemination / response, and help early detection of trends. The new portal also has additional tools and facilities like threads and posts, attachments of various types (that could enhance the quality of information sharing). Search functionality feature within the portal is also being developed to navigate through the portal in a seamless manner.

7. Shri Amit Retharekar, PO Karad Urban Cooperative Bank shared the challenges faced by various Co-operative banks. There are banks where KYC and risk categorization as per RBI is yet to be implemented and the quality of financial intelligence needs to be augmented as per the feedback from FIU-IND. Considering all these aspects there is a need felt for regional level training along with content in the regional language. He outlined that their Bank had conducted training along with FIU-IND in regional language, and this received a very good response. Further he suggested that ARIFAC can initiate a newsletter as a communication channel in the coming months.   

8. To share the further perspectives of industry, a panel discussion on “Private – Private Information Sharing: Perspectives and Enablers” was organized, with participation from:

a) Mr. Manish Bhandari - Principal Officer, ICICI Bank
b) Mr. Jairam Manglani - Principal Officer, Standard Chartered Bank
c) Ms. Rajalaxmi V - Chief Manager (KYC/AML), State Bank of India
d) Mr. Anuj Bhansali - Principal Officer, PhonePe

This discussion was moderated by Dr. Srinivas Yanamandra, Group Head - Regulatory Affairs & Policy of Paytm. During the discussion, the Panel proposed to operationalize the ARIFAC through the following action plan: 

a) Institutionalisation of ARIFAC to be further discussed, in the coming meetings of ARIFAC. A G20 type of rotating secretariat for the functioning of ARIFAC can be considered for wider participation of various REs in the initiative.

b) To kickstart the initiative in a meaningful manner and to set the tone for the future meetings of ARIFAC, the following agenda items are proposed: 

• To prepare a best practice paper on the beneficial owner identification keeping in view the recent changes in the AML legislation (to be led by ICICI Bank and Standard Chartered);

• To prepare a best practice paper on the manner in which the National Risk Assessment (NRA) exercise is to be leveraged for AML CFT framework strengthening at individual entities in the payment aggregator industry (to be led by Paytm and PhonePe);

• To prepare a brief typology report summarizing the latest trends in frauds / ML using latest technologies and cyber capabilities (to be led by SBI).

• To evaluate the possibility of industry-wide trend capturing by way of sharing of centralized AML alert management and disposal process for wider knowledge of REs involved in payment industry (to be led by NPCI). 

While the leads mentioned are for coordinating purpose, the Panel underscored the need for contribution from all REs to ensure that these documents are meaningful to wider audience and serve the objectives of ARIFAC in line with the expectations of FIU-IND.

c) To facilitate this process, all participants at the inaugural meeting will be categorized sector-wise and one nominated PO can represent the sector to begin with the discussions at ARIFAC. The nominations can then be extended to other REs in due course for wider participation. The nominees can further take this message forward to other members in their sector in smaller groups.

d) Thereafter, ARIFAC should focus on organizing regional-level activities so that the participants need not regularly travel to Delhi for contributing to the discussions. In addition, the regional-level groupings are better placed to discuss the typologies / trends emerging in that area and provide opportunity for face-to-face discussion and collaboration amongst REs in that region. PhonePe and SBI agreed to host such regional meetings at locations in South such as in Bengaluru. 

9. The panel discussion concluded with interaction with participants led by Shri Shailesh Thakur, Additional Director (FIU-IND). The interaction summarized the day-long discussion and in particular highlighted that:

a) ARIFAC is not restricted to only 68 members, its open to all the REs

b) ARIFAC success depends on its institutionalization at the earliest; FIU-IND can consider seed funding in initial phase but needs further self-sustained modes of functioning of ARIFAC in due course

c) ARIFAC meetings need not only be at central level, but regional level contact points play a key role in dissemination of objectives of ARIFAC to wider spectrum of REs.

d) The meetings and discussions at ARIFAC meetings should be specific and with time bound action points, instead of broad-level declarations. Industry-wise working groups taking specific actionable will facilitate a smooth delivery of the mission of ARIFAC.

e) A low-hanging fruit ARIFAC should consider is the training and capacity building activities that it can organize with the expertise already gathered at various REs in last few years, that can be shared to other participants in the industry that are in need of the same.