A Technical Guide for Indian Businesses Scaling Globally

As Indian businesses expand into global markets, accepting international payments is no longer just a growth lever. It is a regulatory commitment.

Behind every successful cross-border transaction lies a layered ecosystem of compliance controls, banking oversight, anti-money laundering safeguards, data protection mandates, and central bank regulations. Ignoring or misunderstanding these requirements can result in settlement delays, frozen funds, penalties, or permanent account shutdowns.

This guide breaks down:

• How compliance works in international payments

• KYC and AML obligations across jurisdictions

• Regulatory frameworks affecting Indian exporters

• Common risk and compliance pitfalls

• How modern payment infrastructure simplifies global compliance

1. Why Compliance Is the Foundation of Cross-Border Payments

Cross-border payments differ fundamentally from domestic transactions because they involve:

• Multiple jurisdictions

• Multiple regulated entities

• Foreign exchange conversion

• Cross-border settlement rails

• International card network rules

Each layer introduces additional regulatory exposure.

When an Indian merchant accepts a payment from a customer in the US, EU, UAE, or Singapore, the transaction typically touches:

• A card network such as Visa or Mastercard

• An acquiring bank in the payment processing jurisdiction

• A foreign exchange channel

• A remittance pathway governed by Indian foreign exchange regulations

• Domestic settlement into an Indian bank account

Every participant is regulated. Compliance is not optional. It is infrastructural.

2. Understanding KYC in International Payments

What Is KYC?

Know Your Customer is the regulatory process through which financial institutions verify the identity, legitimacy, and risk profile of a business or individual before enabling financial services.

In cross-border payments, KYC applies to:

• Merchants

• Beneficial owners

• Directors and key management personnel

• In some cases, high-risk customers

Why KYC Is Stricter for International Payments

Cross-border transactions carry elevated risks of:

• Money laundering

• Terror financing

• Trade-based fraud

• Sanctions violations

• Tax evasion

Therefore, acquiring banks and payment providers must conduct enhanced due diligence.

Typical KYC Requirements for Indian Exporters

• Certificate of Incorporation

• PAN and GST details

• Board resolution

• Ultimate Beneficial Owner declaration

• Bank account verification

• Nature of business and website review

• Export classification details

In India, payment aggregators and banks operate under the supervision of the Reserve Bank of India.

RBI guidelines mandate strict onboarding and monitoring requirements for payment intermediaries.

Failure to provide complete documentation often leads to onboarding delays or outright rejection.

3. AML and Transaction Monitoring: What Happens After Onboarding

Onboarding is only the beginning.

Anti-Money Laundering compliance continues throughout the merchant lifecycle.

Core AML Components

1. Sanctions screening against global watchlists

2. Ongoing transaction monitoring

3. Suspicious activity reporting

4. Velocity and behavioral anomaly detection

5. Chargeback and fraud analysis

Globally, AML standards are shaped by the Financial Action Task Force.

Financial Action Task Force

FATF provides international AML recommendations adopted by over 200 jurisdictions.

Payment providers must implement real-time monitoring systems to:

• Detect structuring

• Flag unusually large or inconsistent transactions

• Monitor high-risk geographies

• Identify suspicious refund patterns

If anomalies are detected, accounts may be temporarily suspended pending review.

4. Regulatory Frameworks Governing International Payments

4.1 Indian Regulatory Landscape

Indian exporters receiving international payments must comply with:

• FEMA guidelines

• RBI Master Directions on export proceeds

• Authorized Dealer Category I banking norms

• Payment Aggregator cross-border regulations (PA-CB)

Under FEMA, export proceeds generally must be realised within prescribed timelines, subject to sectoral exemptions.

Settlement into India must occur through RBI-regulated channels.

4.2 Global Regulatory Considerations

Depending on where acquiring occurs, merchants may indirectly fall under:

• US financial regulations

• EU PSD2 standards

• UK FCA rules

• Singapore MAS guidelines

• UAE Central Bank compliance norms

For example:

Financial Conduct Authority regulates payment institutions in the UK.

Monetary Authority of Singapore oversees payment services under the Payment Services Act.

When your payment partner uses licensed foreign entities, compliance obligations extend across these frameworks.

5. Merchant of Record Models and Regulatory Structuring

A Merchant of Record structure centralizes compliance under a regulated foreign entity.

Under this model:

• The foreign entity contracts with the end customer

• Licensed acquirers process transactions locally

• FX conversion occurs at the regulated banking level

• Funds are remitted to India through compliant channels

This model is widely used by global platforms such as:

Stripe
dLocal

Properly structured global acquiring reduces:

• Cross-border decline rates

• Regulatory ambiguity

• Settlement unpredictability

• Excessive intermediary banking fees

6. Key Compliance Challenges for Indian Businesses

6.1 High Decline Rates Due to Risk Filters

International issuers apply stricter fraud checks for cross-border transactions.

If compliance signals are weak, transactions fail at authorization.

6.2 Chargeback Exposure

Cross-border card transactions carry elevated chargeback risk.

Excessive chargeback ratios can trigger:

• Monitoring programs

• Increased reserve requirements

• Acquirer termination

6.3 Sanctions and Restricted Geographies

Payments involving sanctioned jurisdictions can lead to immediate account suspension.

Providers must screen against OFAC and other global sanctions lists.

6.4 Documentation Gaps

Incomplete export classification, vague business descriptions, or website inconsistencies often lead to compliance escalations.

6.5 Data Protection Requirements

Cross-border payments also intersect with:

• PCI DSS standards for card security

• Data localization considerations

• GDPR exposure when dealing with EU customers

7. Hidden Regulatory Costs in Cross-Border Payments

Compliance impacts cost structures through:

• Rolling reserves

• Settlement delays

• Enhanced due diligence fees

• Intermediary bank charges

• FX markups

• Compliance manpower

Many merchants only evaluate processing rates but overlook regulatory friction as a cost multiplier.

8. How Modern Infrastructure Reduces Compliance Friction

Advanced cross-border payment platforms integrate:

• Automated KYC workflows

• Real-time sanctions screening

• Smart transaction monitoring

• Dynamic 3DS trigger controls

• Geo-optimized routing

• Multi-currency settlement

For Indian businesses, this translates into:

• Faster onboarding

• Higher authorization rates

• Lower regulatory exposure

• Compliant INR remittance

9. Best Practices for Managing International Payment Compliance

1. Maintain updated corporate documentation

2. Clearly describe business models and refund policies

3. Implement transparent checkout disclosures

4. Monitor chargeback ratios monthly

5. Avoid high-risk geographies without regulatory clarity

6. Partner with globally licensed processors

7. Ensure PCI DSS compliance for card handling

8. Maintain export reconciliation records

Compliance is an operational discipline, not a one-time checklist.

10. The Future of Cross-Border Compliance

Regulators worldwide are increasing scrutiny on:

• Digital services exports

• Subscription-based global businesses

• BNPL cross-border flows

• Crypto-linked transactions

Real-time transaction monitoring and AI-driven compliance engines are becoming standard infrastructure.

Businesses that embed compliance into product architecture scale faster and face fewer disruptions.

FAQs

• What is the difference between KYC and AML?

KYC focuses on verifying identity and legitimacy at onboarding. AML involves ongoing monitoring to detect suspicious activity.

• Why are cross-border transactions more heavily monitored?

They carry higher risk of money laundering, sanctions violations, and fraud due to jurisdictional complexity.

• Can funds be frozen during compliance review?

Yes. If transactions trigger AML alerts or sanctions screening issues, temporary restrictions may apply.

• Do Indian businesses need to comply with foreign regulations?

Indirectly, yes. If payments are processed via foreign acquiring entities, those entities must comply with their local regulators.

• How can merchants reduce compliance-related declines?

• Improve checkout transparency

• Enable 3DS intelligently

• Maintain low chargeback ratios

• Use geo-optimized acquiring

• Keep documentation current

• What happens if chargeback ratios exceed thresholds?

Card networks may place merchants in monitoring programs, leading to higher fees or termination risk.