Demystifying Wire Transfers: Understanding the Latest Guidelines in Indian KYC

The Reserve Bank of India has recently made amendments to its master directions concerning KYC (Know Your Customer) norms. One notable aspect of these amendments is the clarification provided on the definition of Wire Transfer. The aim of this effort is to provide a clear understanding of what constitutes a Wire Transfer in the context of financial transactions.

By defining Wire Transfers, the Reserve Bank of India seeks to enhance transparency and promote adherence to KYC guidelines in the banking sector. This update is part of the ongoing efforts by the regulatory authority to strengthen the framework for combating financial crimes and ensuring the integrity of the financial system.

Batch transfer

The batch transfer is a transfer comprised of a number of individual wire transfers that are being sent to the same financial institutions but may/may not be ultimately intended for different persons.

Beneficiary

Beneficiary refers to a natural or legal person or legal arrangement who / which is identified by the originator as the receiver of the requested wire transfer.

Beneficiary Registered Entity

It refers to a financial institution, regulated by the RBI, which receives it from the ordering financial institution directly or through an intermediary registered entity and makes the funds available to the beneficiary.

Cover Payment

Cover Payment refers to a wire transfer that combines a payment message sent directly by the ordering financial institution to the beneficiary financial institution with the routing of the funding instruction (the cover) from the ordering financial institution to the beneficiary financial institution through one or more intermediary financial institutions.

Cross-border wire transfer

Cross-border wire transfer refers to any wire transfer where the ordering financial institution and beneficiary financial institution are located in different countries. This term also refers to any chain of wire transfers in which at least one of the financial institutions involved is located in a different country.

Domestic wire transfer

Domestic wire transfer refers to any wire transfer where the ordering financial institution and beneficiary financial institution are located in India. This term, therefore, refers to any chain of it that takes place entirely within the borders of India, even though the system used to transfer the payment message may be located in another country.

Intermediary RE

Intermediary RE refers to a financial institution or any other entity, regulated by the RBI which handles an intermediary element of it, in a serial or cover payment chain and that receives and transmits it on behalf of the ordering financial institution and the beneficiary financial institution, or another intermediary financial institution.

Ordering RE

Ordering RE refers to the financial institution, regulated by the RBI, which initiates it and transfers the funds upon receiving the request for a wire transfer on behalf of the originator.

Originator

Originator refers to the account holder who allows it from that account, or where there is no account, the natural or legal person that places the order with the ordering financial institution to perform it.

Serial Payment

Serial Payment refers to a direct sequential chain of payment where it accompanied payment message travel together from the ordering financial institution to the beneficiary financial institution directly or through one or more intermediary financial institutions (e.g., correspondent banks).

Straight-through Processing

Straight-through processing refers to payment transactions that are conducted electronically without the need for manual intervention.

Wire transfer

It refers to any transaction carried out on behalf of an originator through a financial institution by electronic means with a view to making a number of funds available to a beneficiary at a beneficiary financial institution, irrespective of whether the originator and the beneficiary are the same people.

Originally published at https://riskprolearning.com on June 19, 2023.