India’s Outstanding FATF Evaluation Result 2024: Boosting Global Financial Standing
Singapore: FATF Plenary, 26-28 June 2024
India has achieved an outstanding outcome in the Mutual Evaluation conducted during 2023-24 by Financial Action Task Force (FATF). The Mutual Evaluation Report of India, which was adopted in the FATF plenary held in Singapore between June 26th and June 28th, 2024, places India in the ‘regular follow-up’ category, a distinction shared by only four other G20 countries. This marks a significant milestone in the nation’s efforts to combat money laundering (ML) and terrorist financing (TF).
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.
India’s performance on the FATF Mutual Evaluation holds significant advantages for country’s 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. It will also help in the global expansion of the Unified Payments Interface (UPI), India’s fast payment system.
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.
Since 2014, the Government has enacted a series of legislative changes and bolstered enforcement efforts to tackle ML, TF, and black money. 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.
Over a two-year period, the Department of Revenue (DoR) spearheaded India’s engagement with FATF during the mutual evaluation process. 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.
India is already a member of the FATF Steering Group. India’s 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.
Mutual Evaluation Reports of India
The FATF discussed and adopted the joint FATF/APG/EAG mutual evaluation report of India which assessed the effectiveness of India’s measures to combat money laundering, terrorist financing and proliferation financing, and their compliance with the FATF Recommendations.
The Plenary concluded that India has reached a high level of technical compliance with the FATF requirements and its AML/CFT/CPF regime is achieving good results, including in its ML and TF risk understanding, international cooperation, access to basic and beneficial ownership information, use of financial intelligence, and depriving criminals of their assets and counter-proliferation financing measures. However, improvements are needed to strengthen the supervision and implementation of preventive measures in some of the non-financial sectors. India also needs to address delays relating to concluding ML and TF prosecutions, and to ensure that CFT measures aimed at preventing the non-profit sector from being abused for TF are implemented in line with the risk-based approach, including by conducting outreach to NPOs on their TF risks.
Understanding FATF Mutual Evaluations
FATF mutual evaluations are comprehensive country reports that analyze the implementation and effectiveness of measures to combat money laundering, terrorist financing, and proliferation financing. These reports involve peer reviews, where members from different countries assess another country, providing an in-depth description and analysis of its anti-money laundering and counter-terrorist financing system, along with focused recommendations to further strengthen its system.
During a mutual evaluation, the assessed country must demonstrate an effective framework to protect the financial system from abuse. This process comprises two main components: effectiveness and technical compliance.
Effectiveness ratings are the central focus of a mutual evaluation, involving an on-site visit by a team of experts to collect evidence demonstrating that the assessed country’s measures are working and delivering the intended results, tailored to its specific money laundering, terrorist financing, and other risks.
Ultimately, the mutual evaluation report assesses a country’s measures to combat money laundering, terrorist financing, and the financing of proliferation of weapons of mass destruction, including actions to address the risks stemming from designated terrorists or terrorist organizations. It’s important to note that the mutual evaluation report does not prejudice the status or justification that led to the designation of an entity as a terrorist or terrorist group or organization (FATF Source)
