Corporate cards

SBM Bank India KYC concerns and alternative solution

Apr 05, 2024

The State Bank of Mauritius (SBM), the country's largest commercial bank, provides a comprehensive variety of banking and financial services to people, businesses, and organizations. Investment banking, corporate banking, trade finance, personal and business banking, and treasury services are some of their specialties. The mobile banking app and digital banking platform are two of SBM's cutting-edge goods and services. Several awards and accolades have been bestowed upon the bank for its outstanding performance in the banking industry, demonstrating its ongoing commitment to providing first-rate customer service. 

However, SBM recently experienced a Know Your Customer (KYC) issue that caused a delay in its corporate credit card operations. This issue has forced the bank to stop offering corporate credit cards, which will affect around 6,000 company credit cards.

As long as the issue persists, these cardholders won't be able to use their cards. The bank is frantically trying to fix the problem and get its business credit card program back up and running. SBM is dedicated to providing excellent service to its customers and is making every effort to have this problem fixed as quickly as possible.

For the purpose of preventing fraud, money laundering, and the funding of terrorism, banks and other financial institutions use KYC to verify the identity of their customers. Due to SBM's compliance issues with KYC requirements in this instance, the bank was unable to respond to the regulator's inquiries adequately.

SBM's KYC problem dates back to 2018 when the bank was charged with failing to stop a $2 billion fraud at an Indian bank. The Mauritian regulator opened an investigation after SBM failed to provide the pertinent information that the Indian authorities had requested about the transactions involved in the scheme.

Since then, the organization has been looking into SBM's KYC procedures, and in March 2021, the regulator sent SBM a letter requesting that the company hold off on issuing new credit cards until the KYC problem was resolved.

For its part, SBM has stopped offering business credit cards to current customers. Customers of SBM have voiced concern over the KYC problem, and several organizations and individuals have urged the bank to quickly fix it so that they may resume processing credit cards.

However, the regulator has made it clear that it will not budge on the KYC requirements, and SBM must show compliance before it can resume processing credit cards.

What is KYC verification?

Financial institutions verify that their customers are who they say they are using the Know Your Customer, or KYC, process. In order to prevent fraud, money laundering, and terrorist financing, banks and other financial institutions are required by law to comply with KYC requirements. The customer's name, address, date of birth, and formal identification documents like a passport or driver's license are among the details that KYC gathers about the customer's identity. After that, the data is verified to ensure that the customer is who they claim to be.

Verifying the information a consumer provides throughout the KYC process is known as KYC verification. A standard step in the verification process involves comparing the customer's data to public databases, government databases, and databases maintained by credit reference bureaus. The customer's identity may also be verified using additional procedures, such as biometric authentication. In order to do this, the physical characteristics of the customer—such as their fingerprints or facial features—must match those on their identification documents.

A crucial element in ensuring the integrity of the financial system and preventing fraud and other financial crimes is KYC verification. Financial institutions are required to do KYC verification for each new customer and to review the data to ensure its accuracy regularly.

Why is the KYC verification process necessary for businesses?

Businesses must go through the KYC (Know Your Customer) verification process to check their clients' identities and guarantee they are not engaging in any criminal behavior. KYC verification comprises acquiring and verifying customers' personal data, including their name, address, date of birth, and identity documents.

Some of the reasons why KYC verification is necessary for businesses:

1. Preventing frauds

By confirming the identity of its consumers, KYC verification helps businesses prevent fraud. This makes it easy to confirm that consumers are who they say they are and aren't committing fraud or other criminal acts while impersonating someone else.

Additionally, KYC helps businesses identify and stop financial crimes like money laundering and terrorist financing.

2. Compliance with regulation

KYC verification is required by law in a number of countries, including the United States, the United Kingdom, and the European Union. Businesses that disregard KYC requirements run the danger of facing penalties, fines, and brand damage.

3. Enhances reputation

By proving that they care about their customers' security, corporations may enhance their reputation using KYC verification. Customers are more likely to trust businesses that have robust KYC procedures in place because it demonstrates that they are committed to preventing fraud and protecting client data.

4. Mitigating risk

Since KYC verification lowers the risk of fraud, financial crime, and reputational damage, it is a crucial risk management strategy for businesses. By helping businesses identify and validate customers before enabling them to utilize their goods or services, KYC helps to reduce the risk of fraudulent behavior. By establishing a robust KYC system, businesses may reduce the risk of financial losses, regulatory penalties, and brand damage.

Overall, organizations that want to prevent fraud, comply with regulations, enhance their reputation, and lower risk must go through KYC verification. By implementing a strict KYC process, businesses may protect their client's data and prevent financial crime while also demonstrating their dedication to security and compliance.

Why does SBM block its co-branded corporate credit cards?

SBM Bank must update its KYC (Know Your Customer) data for users of business credit cards by March 2021, under instructions from the Reserve Bank of India (RBI). As a result, SBM Bank forbade any of its affiliates, including Ola, MakeMyTrip, Yatra, and Vistara, from using its co-branded business credit cards.

The RBI's requirement to update the KYC information of corporate credit cardholders was the main factor in the rejection of these co-branded corporate credit cards. The RBI has increased its KYC compliance requirements in order to fight financial crime and money laundering. The KYC process helps banks identify and validate the identities of their clients and make sure they are not engaged in any illegal activity.

The Liberalised Remittance Scheme (LRS) and other regulatory difficulties had an effect on the co-branded business credit cards offered by SBM Bank. With the help of the LRS initiative, Indians can transfer money abroad for a range of uses, including investments, medical treatment, and education. The amount of money that can be transmitted through the LRS is, however, subject to an annual cap. The co-branded corporate credit cards from SBM Bank were suspended after it was discovered that certain cardholders had violated the LRS limitations.

Co-branded corporate credit cards from SBM Bank were suspended, which had an effect on a number of businesses and their clients. The Ola Money SBI Credit Card, for instance, which has the co-brand Ola and SBI Card and is offered by SBM Bank, is impacted by the prohibition. Ola Money SBI Credit Cardholders were thus prevented from using their cards for a number of days. Customers of MakeMyTrip ICICI Bank Credit Card, Yatra SBI Card, and Vistara SBI Card were also impacted by the restriction.

Customers experienced trouble since they were unable to make transactions with their co-branded company credit cards. SBM Bank, on the other hand, took prompt action to meet the RBI's demands and update its KYC data. The bank prohibited the usage of its co-branded corporate credit cards until the KYC information was updated.

Wrapping up

State Bank of Mauritius (SBM), Mauritius' largest commercial bank, is presently resolving a Know Your Customer (KYC) issue that has necessitated suspending its corporate credit card operations, affecting over 6,000 corporate credit cards.

Financial institutions utilize the KYC procedure to check their clients' identities in order to avoid fraud, money laundering, and terrorist financing. Organizations must do KYC verification in order to prevent fraud, adhere to regulations, enhance their reputation, and lower risk. The regulator has made it clear that it won't bend on KYC requirements, and SBM will need to show compliance before it can continue processing credit cards. The cancellation of SBM's business credit card serves as a reminder of the significance of KYC requirements and the consequences of non-compliance.

Finally, having a strong KYC procedure allows organizations to protect the information of their clients, prevent financial crime, and demonstrate their commitment to security and compliance.

What should businesses do now?

Business credit cards are one of the most essential services offered by financial institutions. This is because business credit cards are an integral tool through which companies make their spending and investments.

Suddenly non-functional credit cards can have grave damaging effects on a company's cash flow.

So, what can businesses do now?

Let us present an easy solution. Volopay corporate cards. Volopay is an all-in-one spend management platform that, along with providing other financial management services, also offers state-of-the-art corporate cards, both virtual and physical. 

Volopay physical corporate cards eliminate the need where your employees to make business expenses from their pocket. With these cards, they can easily make payments to any offline merchant.

Plus, these cards are built with bank-grade security and encryption. Volopay virtual cards get even better. You can create unlimited virtual cards and assign those to individual employees, departments, projects, etc. Virtual cards are useful for making online contactless payments.

Along with this, if you are looking to get business credit, Volopay offers that too. Volopay credit can be availed without any personal guarantee and at a lower interest rate in comparison to any other in the market.

Plus, credit approval comes fast and easy. It does not end here; there is so much more.

What are you waiting for, get started with Volopay today!