FATF 'Thumbs Up' Ensures India Will Be among Top Nations on Checks against Money Laundering, Terror Financing: Govt Sources to News18

India has achieved an “outstanding outcome” in the mutual evaluation conducted during 2023-24 by the Financial Action Task Force (FATF). The intergovernmental body has recognised India’s efforts to combat money laundering and terrorist financing.

The Mutual Evaluation Report of India, which was adopted in the FATF plenary held in Singapore between June 26 and June 28, 2024, has placed the country in the “regular follow-up” category, a distinction shared by only four other G20 nations.

Among other things, FATF has recognised the efforts made by India on:

• Mitigating the risks arising from ML/TF, including the laundering of proceeds from corruption, fraud, and organised crime.
• Effective measures implemented by India to transition from a cash-based to a digital economy to reduce ML/TF risks.
• Implementation of the JAM (Jan Dhan, Aadhaar, Mobile) Trinity, along with stringent regulations on cash transactions, has led to a significant increase in financial inclusion and digital transactions; these measures have made transactions more traceable, thereby mitigating ML/TF risks and enhancing financial inclusion.

The Financial Action Task Force (FATF) is an intergovernmental organisation established in 1989 as the international watchdog to combat money laundering, terrorist financing, and other related threats to the integrity of the international financial system. India became a member of FATF in 2010.

According to top government sources, India’s performance accrues significant advantages to its growing economy, as it demonstrates the overall stability and integrity of the financial system. Good ratings will lead to better access to global financial markets and institutions and increase investor confidence, they said. It will also help in the global expansion of the Unified Payments Interface (UPI), India’s fast payment system, they added.

“This recognition from the FATF is a testament to the rigorous and effective measures implemented by India over the last 10 years to safeguard its financial system from ML/TF threats. It underscores the country’s commitment to international standards and its proactive stance in the global fight against financial crimes. This sets a benchmark for countries in our region to effectively implement international standards on terrorist financing. 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,” a government statement said.

Since 2014, the government has enacted a series of legislative changes and bolstered enforcement efforts to tackle ML, TF, and black money, it added. “This multi-pronged strategy has brought these measures in line with international standards and has demonstrably proven to be effective, yielding positive results. 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,” said the statement.

Over a two-year period, the department of revenue (DoR) spearheaded India’s engagement with FATF during the mutual evaluation process, it said. “This success was driven by the exceptional efforts and invaluable contribution of a diverse, multi-disciplinary team comprising representatives from various ministries, the National Security Council Secretariat (NSCS), state authorities, the judiciary, financial sector regulators, self-regulatory organisations, financial institutions, and businesses all played a critical role. This collaborative effort demonstrated India’s effective AML/CFT framework,” said the statement.

India is already a member of the FATF Steering Group. Its current performance will provide India with an opportunity to contribute significantly to the group’s overall functioning.

“India remains committed to further strengthening its AML/CFT framework and continuing its collaboration with international partners to combat financial crimes. The nation will build on this success to ensure a secure and transparent financial environment for all,” said the government statement.

This, said government sources, is a significant achievement that ensures India is in the top category of countries on safeguards against money laundering and terrorism financing.

It was a team effort and an example of a whole of government approach on issues of national security involving multiple stakeholders including the National Security Council Secretariat (NSCS) under the National Security Adviser (NSA), they added.

It also shows how steps taken by the top leadership to ensure inclusion like JAM trinity, stringent regulations on cash, and formalising the economy contributed towards mitigating risks to national security, said the sources.

This will accrue several benefits to the economy due to investor confidence in India’s overall stability and integrity of the financial system, they said.