INDIA Law and Practice Contributed by: Shilpa Mankar Ahluwalia, Purva Anand and Ansh Jain, Shardul Amarchand Mangaldas & Co
data that does not strictly constitute credit data and is therefore not currently subject to regulatory limitations. Such behavioural scoring may be based on social media presence of consumers, consumption patterns on e-commerce websites, etc. However, the consent requirements under the DPDP Act (once enforced) will also cover such data collection and processing. Booking Services Authorised PPI issuers are also offering ticketing (railways, airlines, etc) and hotel booking services in addition to their core product offering to provide their customers with a seamless customer experience. 2.14 Impact of AML and Sanctions Rules The KYC Master Directions apply to REs (including banks, NBFCs, PPI issuers, and payment system providers). The KYC Master Directions require such entities to abide by the provisions of the PMLA and various rules framed under it. REs must file reports of suspicious transactions, including transactions relating to terrorism, with the FIU-Ind. REs are also required to appoint a principal officer who is respon - sible for monitoring and reporting all transactions and sharing information as required under the law. Unregulated entities are not required to comply with the provisions of the PMLA and various rules framed under it. The Outsourcing Guidelines also restrict banks, NBFCs and PSOs from outsourcing core func - tions such as KYC compliance. 2.15 Financial Action Task Force (FATF) Standards Indian anti-money laundering and sanction norms are generally aligned with Financial Action Task Force (FATF) standards. 2.16 Reverse Solicitation India does not permit otherwise regulated products and services to be offered from another jurisdiction under a reverse solicitation scenario without trigger - ing domestic regulations. Typically, any cross-border fintech offering, regardless of the solicitation’s origin, would necessitate conformity with Indian financial, exchange control and data protection laws.
A fintech offering in India would typically need to com - ply with the regulatory framework for financial services (see 2.2 Regulatory Regime ), as the regulations are activity-centric. Even in other cases, the Indian foreign exchange legislation (FEMA), which imposes strict controls on cross-border transactions, would typical - ly be applicable to any offering of cross-border pay - ment or investment products (see 5.2 Regulation of Cross-Border Payments and Remittances ). Payment products, lending offerings or investments/wealthtech products may or may not require prior RBI approval (it could be a capital account transaction or be permis - sible under the liberalised remittance scheme), but in any case will need to be FEMA-compliant. 3. Robo-Advisers 3.1 Requirement for Different Business Models The robo-adviser financial market has been evolv - ing rapidly in India over the last few years; however, the regulatory framework is at a very nascent stage. While undertaking the business of investment advice requires registration with SEBI, current regulations do not stipulate a specific requirement for registration of robo-advisers with SEBI. As a matter of market practice, robo-advisers have focused on one or more asset classes, depending on their client base and area of expertise. There are a range of robo-advisers in India that focus on offering advice in connection with equity-based investments, while others focus on investments in funds and other general wealth advisory. 3.2 Legacy Players’ Implementation of Solutions Introduced by Robo-Advisers The legacy players in India have been quick to recog - nise and utilise the potential of robo-advisers. Several RE players have been quick to establish a multi-asset robo-advisory platform. Legacy players across India have taken a two-pronged approach to incorporating robo-advisory services: • acquisition or partnerships with players in the robo- advisory space; or
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