India has received a positive assessment from the Financial Action Task Force (FATF), the global watchdog for terror financing, placing the country in the ‘regular follow-up’ category. This distinction is shared with only three other G20 nations: the UK, France, and Italy.
The FATF recognized India’s significant strides in achieving a high level of technical compliance across its spectrum of recommendations. The organization acknowledged India’s efforts in implementing measures to tackle illicit finance, including a strong emphasis on disruption and prevention of terrorist financing. However, the FATF also identified areas where India needs to improve.
One key concern raised by the FATF was the backlog of money laundering cases pending court conclusions. Despite India’s demonstrated ability to conduct complex financial investigations, the report highlighted the impact of constitutional challenges on the number of convictions. The report noted that while prosecutions and convictions have started to increase, a considerable backlog of cases remains, with many accused awaiting the conclusion of their trials. This backlog also affects the effectiveness of confiscating criminal proceeds, particularly in money laundering cases overseen by the Enforcement Directorate (ED).
The report also emphasized the need for India to improve the implementation of cash restrictions by dealers in precious metals and stones, citing the importance of this sector. It stated, “India faces serious terrorism and terrorist financing threats, including related to ISIL or Al Qaeda. India has a strong emphasis on disruption and prevention and has demonstrated its ability to conduct complex financial investigations. However, India needs to focus on concluding the prosecutions and convict and appropriately sanction terrorist financiers,” according to the FATF’s Mutual Evaluation Report: September 2024.
Despite these challenges, the FATF acknowledged India’s positive achievements in financial inclusion, including a doubling of the proportion of the population with bank accounts, promoting digital payment systems, and simplifying due diligence for small accounts. These efforts contribute to financial transparency, which in turn supports anti-money laundering and counter-terrorist financing initiatives.
The report also praised India’s effective cooperation and coordination on matters related to illicit financial flows, including the utilization of financial intelligence. India’s accomplishments in international cooperation, asset recovery, and implementing targeted financial sanctions for proliferation financing were also highlighted.
In response to the FATF report, a senior finance ministry official stated that the government is actively working to expedite the prosecution and conviction processes. Vivek Aggarwal, additional secretary at the department of revenue, emphasized the government’s commitment to bringing back fugitives like Vijay Mallya and Nirav Modi, who have been accused of money laundering. He expressed hope that these fugitives will be returned to India soon.
India’s inclusion in the ‘regular follow-up’ category signifies its commitment to combating money laundering and terrorism financing, but also underscores the importance of addressing the remaining challenges to achieve a fully compliant status. The FATF’s assessment serves as a valuable roadmap for India to further strengthen its financial system and safeguard its economic security.
