Terror watchdog FATF praises India for anti-money laundering efforts

International watchdog Financial Action Task Force lauded India’s efforts in mitigating risks of terror funding and money laundering. The organisation placed India in the ‘regular follow-up’ category, a distinction shared with only four other G20 countries. The task force adopted the country’s Mutual Evaluation Report at the three-day Plenary held in Singapore that culminated today June 28.

“This marks a significant milestone in the nation’s efforts to combat money laundering (ML) and terrorist financing (TF),” the official release by the Ministry of Finance said.

FATF acknowledged India’s efforts in mitigating risks of corruption, fraud, and organised crime as well. The efforts that FATF specifically recognised include the transition to a digital economy reducing ML/TF risks, and implementation of the JAM (Jan Dhan, Aadhaar, Mobile) trinity leading to financial inclusion and more traceable transactions.

“Delegates discussed and adopted the joint FAT/APG/EAG assessment of India and the joint FATF-MENAFATF assessment of Kuwait,” read a FATF release.

The Finance Ministry noted that a positive evaluation based on FATF guidelines signals the overall stability and integrity of the financial system and will lead to better access to global financial markets, and increase investor confidence, aside from the probable global expansion of the country’s digital payment system, Unified Payments Interface. Already a member of the FATF Steering Group, good ratings allow India to contribute to the former’s overall functioning significantly.

“This recognition from the FATF…underscores the country’s commitment to international standards and its proactive stance in the global fight against financial crimes. India’s excellent rating will enhance the capacity of our country to lead the global effort on countering cross-border terror financing and money laundering,” the release stated.

The enactment of a series of legislative changes and enforcement efforts formed the country’s multi-pronged strategy to implement the measures in line with international standards. “Indian authorities have had success in dismantling the terror funding network using actionable intelligence inputs. These operations have stemmed the flow of terror funding, black money, and narcotics, even along the coastline,” added the report.

The Department of Revenue of the Ministry led the country's engagement with FATF during the evaluation process. The team comprised representatives from various ministries, the National Security Council Secretariat (NSCS), state authorities, the judiciary, financial sector regulators, self-regulatory organisations, financial institutions, and businesses.

“The Plenary concluded that India has reached a high level of technical compliance with the FATF requirements and its AML/CFT/CPF regime is achieving good results, including in its ML and TF 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 FATF release stated.

The plenary made a series of recommendations to India including the need to strengthen supervision and implementation of preventive measures in non-financial sectors and to address delays relating to money laundering and terror financing prosecutions.

Aside from India, Kuwait too was granted an adequate legal and supervisory framework to address ML/TF/PF (proliferation (of weapons of mass destruction) financing), while serious shortcomings remain in the case of delivering effective outcomes.

In 1989, the FATF was an intergovernmental organisation acting as the international watchdog to combat money laundering, terrorist financing, and other related threats to the international financial system. India joined the group in 2010.

The sixth and final FATF Plenary under the Presidency of Singapore’s T. Raja Kumar reiterated the failure of Kim Jong Un led the Democratic People’s Republic of Korea in addressing the anti-money laundering deficiencies and combating the terrorist financing and the continued involvement of the country in illicit activities related to the proliferation of weapons of mass destruction.

The group maintained its decision to suspend the membership of the Russian Federation on account of the Ukraine war.

While Monaco and Venezuela were added to the list of jurisdictions subject to increased monitoring, Jamaica and Türkiye became the two jurisdictions no longer under Increased Monitoring.