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FATF Mutual Evaluation Report on India (2024)
Why in News?
The Financial Action Task Force (FATF) has praised India’s efforts in combating money laundering and terror financing, while recommending the need for expedited prosecutions in financial fraud cases.
About Financial Action Task Force (FATF):
- Established: 1989, at the G7 Summit in Paris.
- Mandate: Global money laundering and terrorist financing watchdog.
- Members: 38 member jurisdictions and 2 regional organisations.
- India: Observer since 2006, full member since 2010.
- Location: FATF Secretariat at OECD Headquarters, Paris.
- Objective: To set international standards for combating money laundering (ML) and terrorist financing (TF).
FATF Mutual Evaluation Process:
- Comprehensive Assessment: Evaluates a country’s compliance with FATF standards.
- India’s Status: In the “regular follow-up” category for compliance with AML and CTF.
- Next Assessment: 2031.
Key Highlights of FATF’s Mutual Evaluation Report on India
Commendations:
- High-Level Compliance: India complied/largely complied with 37 out of 40 FATF recommendations.
- Jan Dhan-Aadhaar-Mobile (JAM) Initiative: Praised for boosting financial inclusion.
- GST Implementation: Recognised for increasing transparency in the supply chain.
Areas for Improvement:
- Prosecutions and Convictions: Limited number of prosecutions and convictions in ML and TF cases.
- Delays in Trials: Delays due to challenges to the Prevention of Money Laundering Act (PMLA) between 2014-2022.
- Customer Risk-Profiling: Requires improvement in financial institutions.
- MCA Registry Monitoring: Needs better oversight of ownership information.
Enforcement and Compliance Measures:
- Enforcement Directorate (ED): Praised for confiscating assets worth ₹16,537 crore.
- Shell Companies: Removal of 3,82,875 shell companies and disqualification of 3 lakh directors.
International Cooperation and Asset Recovery:
- Coordination: India’s strong international cooperation on financial intelligence was appreciated.
- Targeted Financial Sanctions: Urged to improve the framework for freezing funds and assets.
Terrorism Threats in India:
- Disparate Range of Threats: From regional insurgencies to ISIL and al-Qaeda-linked groups.
- Key ML Risks: Stem from fraud, corruption, and drug trafficking.
Non-Profit Sector and Politically Exposed Persons (PEPs):
- NPO Sector: Needs better safeguards against misuse for terror financing.
- Domestic PEPs: Absence of a clear definition and risk-based measures under AML laws.
Recommendations by FATF:
- Expedite Court Cases: Increase the capacity of courts for handling money laundering cases.
- Targeted Financial Sanctions: Ensure real-time updates and improve communication regarding sanctions.
- PEP Definition: Define domestic PEPs and apply enhanced due diligence measures.
- DNFBP Supervision: Increase regulation and supervision of Designated Non-Financial Businesses and Professions (DNFBPs).
Implications for India:
- Global Recognition: Enhances India’s ability to recover illicit assets.
- Access to Global Financial Systems: Improves India’s access to international financial markets and institutions.
- Investor Confidence: Positive evaluation boosts foreign investor confidence.
