FATF clears India during mutual evaluation; no red flags: Officials

The Financial Action Task Force (FATF) on Friday concluded India had a “high level of technical compliance” with its standards to counter money laundering and terror financing and said New Delhi’s mechanisms for this are “achieving good results”.

The multilateral financial watchdog unveiled its conclusions at its plenary meeting in Singapore following a year-long process, during which an FATF team visited New Delhi for on-site evaluation of India’s measures and met senior officials.

“The intergovernmental organisation, which sets international anti-money laundering standards and counter-terrorist financing measures, has not found any red flags in India’s processes,” said an officer who didn’t want to be named.

The FATF discussed and adopted “mutual evaluation report” of India, which assessed the effectiveness of the country’s measures to combat money laundering, terrorist financing and proliferation financing, and their compliance with the watchdog’s recommendations.

“The Plenary concluded that India has reached a high level of technical compliance with the FATF requirements and its AML/CFT/CPF [anti-money laundering/ countering the financing of terrorism/ counter proliferation financing] regime is achieving good results, including in its ML [money laundering] and TF [terrorist financing] 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,” the watchdog said in a statement.

The FATF, however, said “improvements are needed to strengthen the supervision and implementation of preventive measures in some of the nonfinancial sectors”.

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It also said India “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 [non-profit organisations] on their TF risks”.

The FATF said it would publish the report for India after its quality and consistency review is completed.

As reported by HT, an Indian delegation visited Singapore in April to apprise the FATF about steps taken to counter money laundering and terror financing over the past decade. The Indian team comprising officials from the Enforcement Directorate (ED), income-tax department, Central Bureau of Investigation (CBI), Directorate of Revenue Intelligence (DRI), and the finance and external affairs ministries had face-to-face consultations on the evaluation.

New Delhi last underwent such a review in 2010 and was already in the compliant category.

The mutual evaluation of India was scheduled for September 2020, but was delayed because of the Covid-19 pandemic.

Officials said the Indian government had apprised the FATF and peers about amendments in the Prevention of Money Laundering Act (PMLA), registration of more than 5,000 money laundering cases in the past 10 years, the arrest of 755 individuals and attachment of properties worth more than ₹1.21 lakh crore.

A key change since the last review was defining a “politically exposed person” under the PMLA, which was recommended by the FATF. Besides, the Indian government widened the ambit of PMLA to bring non-government organisations and crypto-currencies under it, so that illicit financial transactions through virtual digital assets (VDAs) can be monitored.

The Reserve Bank of India (RBI) has stepped up scrutiny of fintech firms to ensure they follow the provisions of the anti-money laundering law, and is keeping tabs on suspicious transactions, officials said.

The government also enacted a new law in 2018 to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of local courts. The Fugitive Economic Offenders Act of 2018 empowers authorities for non-conviction-based attachment and confiscation of assets and proceeds of crime abroad in cases involving amounts more than ₹100 crore.

The FATF conducts peer reviews of each member country to assess the implementation of its recommendations and provides an in-depth description and analysis of each country’s system.

In 2019, the Indian government set up a joint working group comprising 22 central investigation, intelligence and regulatory agencies to make presentations, hold discussions with, and brief FATF experts.

Over the past few years, the ED has aggressively gone after businessmen, politicians and companies involved in money laundering and violation of rules laid down by the government and regulatory authorities, even as provisions of the PMLA were described by many political parties, lawyers and businessman as “draconian”.

The courts have, however, upheld most of its arrests and prosecution complaints that are equivalent to charge sheets.