The Financial Action Task Force on Money Laundering (FATF), the global watchdog for combating financial crime, has released its long-awaited mutual evaluation report on India’s anti-money laundering and counter-terrorism financing systems. While the report acknowledges that India’s systems are “effective” in many areas, it emphasizes the need for “major improvements” to strengthen prosecution in these cases.
The 368-page report, published following an on-site assessment in November 2022, places India in the “regular follow-up” category, a distinction shared by only four other G20 countries. This means that India will undergo its next evaluation in 2031. The report indicates that India has implemented an anti-money laundering (AML) and combating financing of terror (CFT) system that demonstrates effectiveness in several aspects. However, it highlights the critical need for bolstering prosecution efforts in money laundering and terror financing cases. Furthermore, the report stresses the importance of strengthening safeguards within the non-profit sector to prevent its exploitation for terrorist activities.
The FATF report emphasizes that India’s primary sources of money laundering originate from within the country, stemming from illegal activities. It also acknowledges the diverse range of terrorist threats India faces, particularly from groups like ISIL (Islamic State or ISIS) and Al Qaeda-linked organizations active in and around Jammu and Kashmir.
The report provides a comprehensive analysis of India’s compliance with the FATF’s 40 Recommendations, evaluating the effectiveness of its AML/CFT system. It offers specific recommendations to further strengthen the system and enhance its overall effectiveness in combating financial crime.
This report carries significant weight in the global financial landscape. The FATF’s findings and recommendations will guide India’s efforts to improve its anti-money laundering and counter-terrorism financing regime, ultimately contributing to a safer and more secure financial ecosystem.
