In its brief outcome statement, the Financial Action Task Force (FATF), a global anti-money laundering watchdog, has put India in the “regular follow-up” category and underlined the need to address delays in concluding prosecution in cases on money laundering and terror financing.
The “regular follow-up” category, a status shared by only four other G20 nations —the UK, France, Italy, and Russia — marks a significant achievement in India’s battle against financial crimes, the ministry pointed out. In the evaluation of 2010, there were no ratings. Among the 17 countries evaluated in the fourth round in G20, only four other countries are in the “regular follow-up” category. The rest are in the “enhanced follow-up” tent and one of them is on the grey list.
The FATF has said India has reached a “high level of technical compliance” in line with its (FATF’s) guidelines. However, the country must do more to strengthen its oversight and implementation of preventive measures in certain non-financial sectors.
“India’s performance on the FATF Mutual Evaluation accrues significant advantages to our growing economy, as it demonstrates the overall stability and integrity of the financial system,” the Union finance ministry said in a statement.
The FATF observations came on Friday as part of its mutual evaluation report on India. Even though it is not backed by a statute, global investors attach significance to FATF outcomes.
The report assesses the “effectiveness of India’s measures to combat money laundering, terrorist financing, and proliferation financing”.
The finance ministry is of the view that good ratings will give India better access to global financial markets and institutions and increase investor confidence. It will also help in the global expansion of Unified Payments Interface (UPI), India’s digital payment ecosystem, the ministry noted.
The task force said India was achieving good results, including in its money-laundering and terror-financing risk understanding, international cooperation, access to basic and beneficial ownership information, use of financial intelligence, and depriving criminals of their assets and counter-proliferation financing measures.
The task force recommended India take a “risk-based approach” in implementing counter-terrorism financing measures in the non-profit sector.
After a yearlong process during which a delegation from the FATF visited New Delhi to evaluate India’s actions, it announced its conclusions during its plenary meeting in Singapore. The last FATF evaluation happened in 2010. Due to the pandemic and the pause in the FATF’s assessment, the mutual evaluation of India was postponed to 2023.
The FATF plans to release a detailed report on India following a quality and consistency review.
Further, the FATF acknowledged India’s efforts to mitigate risks from money laundering and terror financing, including measures to transition from a cash-based to a digital economy. The implementation of the JAM (Jan Dhan, Aadhaar, Mobile) trinity and stringent regulations on cash transactions have increased financial inclusion and digital transactions, making them more traceable and reducing money-laundering and terror-financing risks.
Since 2014, the government has brought in legislative changes and bolstered enforcement to tackle money laundering, terror financing, and black money.
The Department of Revenue led India’s engagement with the FATF during the mutual evaluation process, supported by a diverse team from various ministries, the National Security Council Secretariat, state authorities, the judiciary, financial-sector regulators, and businesses.