India's Stand on Anti-Money Laundering: FATF's Evaluation and Recommendations

The Financial Action Task Force (FATF) has acknowledged India’s progress in its anti-money laundering (AML) and counter-terrorist financing (CFT) efforts, describing the country as achieving “good results.” However, the global watchdog has also highlighted areas where further improvements are needed.

The FATF will publish the report after its quality and consistency review is completed, it stated.

High Compliance, But Room for Improvement

In a recent statement, the FATF praised India’s high level of technical compliance with its AML/CFT standards. This recognition reflects India’s ongoing efforts to align its financial systems with international norms aimed at combating money laundering and terrorist financing. The FATF will publish a detailed report after completing its quality and consistency review, outlining India’s compliance status and areas for further enhancement.

Despite the positive assessment, the FATF has flagged several areas requiring attention. Notably, there are concerns about delays in prosecuting cases of money laundering and terrorist financing. The FATF also emphasized the need for India to enhance its measures in non-financial sectors such as real estate, precious metals and stones, and virtual asset service providers. These sectors were recently brought under the Prevention of Money Laundering Act (PMLA), demonstrating India’s commitment to a comprehensive AML framework.

Action on Delays and Non-Profit Sector Oversight

One significant area for improvement highlighted by the FATF is the need to expedite the conclusion of money laundering and terrorist financing cases. The watchdog also pointed out the necessity of implementing measures to prevent the misuse of the non-profit sector for terrorist financing, recommending a risk-based approach and increased outreach to non-profit organizations (NPOs).

A source, who requested anonymity, mentioned that all the issues raised by the FATF would be addressed in due course. India plans to conduct a fresh national risk assessment in 2025 to better understand and mitigate potential risks in its financial system.

Strengthening Non-Financial Sector Supervision

The FATF’s mutual evaluation report, which assesses the effectiveness of India’s measures to combat money laundering, terrorist financing, and proliferation financing, concluded that India has made significant progress. The report recognized India’s achievements in understanding and mitigating ML and TF risks, enhancing international cooperation, and improving access to beneficial ownership information.

However, the FATF noted that India must strengthen its supervision and implementation of preventive measures in certain non-financial sectors. This includes addressing delays in prosecuting ML and TF cases and ensuring that non-profit organizations are not exploited for terrorist financing purposes.

Government Crackdown on NGOs

The FATF’s comments come against a backdrop of increased scrutiny of non-governmental organizations (NGOs) in India. In 2022, the Enforcement Directorate (ED) provisionally attached assets worth Rs 1.54 crore belonging to Amnesty International Trust, citing a money laundering investigation. Similarly, in 2015, the government suspended foreign funding to Greenpeace India, citing violations of the Foreign Contribution Regulation Act (FCRA).

Earlier this year, the Centre for Policy Research (CPR), a prominent think tank, had its FCRA license canceled, highlighting the government’s ongoing efforts to regulate foreign funding of NGOs and ensure compliance with financial regulations.

FATF’s Global Perspective

At its latest Plenary, the FATF added Monaco and Venezuela to its list of jurisdictions under increased monitoring. It also emphasized the need for Kuwait to focus on preventing the misuse of legal entities and protecting the non-profit sector from terrorist financing abuse. The FATF acknowledged significant progress made by Jamaica and Türkiye in addressing previously identified AML and CFT deficiencies.

The FATF reiterated its concerns about North Korea’s continued non-compliance with international AML and CFT standards, citing the significant threat posed by its illicit activities related to weapons of mass destruction.

India’s Commitment to FATF Standards

India’s dedication to adhering to FATF standards is evident in the concerted efforts of a multi-disciplinary team led by the Department of Revenue. The team, headed by Vivek Aggarwal, Additional Secretary of Revenue, has actively defended India’s position in FATF evaluations. The team included more than 150 officers from various ministries and agencies, showcasing a comprehensive approach to strengthening India’s financial integrity.

Aggarwal, who also serves as Director of the Financial Intelligence Unit-India (FIU-IND), has been a vocal advocate for India’s position on FATF matters since 2022. Under his leadership, India has reinforced its commitment to global AML/CFT standards, participating actively in FATF plenaries and contributing to international efforts to combat financial crimes.