FATF recognises India’s efforts to combat money laundering, terrorist financing

India has achieved an “outstanding outcome” in the 2023-24 Mutual Evaluation conducted by the Financial Action Task Force (FATF).

The Mutual Evaluation Report, adopted during the FATF plenary held in Singapore from June 26 to June 28, placed India in the ‘regular follow-up’ category, a distinction shared by only four other G20 countries. This marks a significant milestone in India’s efforts to combat money laundering (ML) and terrorist financing (TF), a Finance Ministry release said.

The release said FATF has recognized India’s comprehensive measures in mitigating risks arising from ML and TF, including the laundering of proceeds from corruption, fraud, and organized crime.

It includes effective measures to transition from a cash-based to a digital economy, reducing ML/TF risks and Implementation of the JAM (Jan Dhan, Aadhaar, Mobile) Trinity and stringent regulations on cash transactions, significantly increasing financial inclusion and digital transactions, making transactions more traceable and reducing ML/TF risks.

India’s performance in the FATF Mutual Evaluation brings substantial benefits to the country’s growing economy as it highlights the stability and integrity of its financial system.

According to the ministry, the high ratings will enhance access to global financial markets and institutions, boost investor confidence, and support the global expansion of India’s fast payment system, the Unified Payments Interface (UPI).

This recognition from FATF highlights the rigorous and effective measures implemented by India over the past decade to safeguard its financial system from ML/TF threats. It sets a benchmark for other countries in the region to effectively implement international standards on terrorist financing.

India’s excellent rating enhances its capacity to lead global efforts in countering cross-border terror financing and money laundering.

Since 2014, the Indian government has enacted a series of legislative changes and enhanced enforcement efforts to tackle ML, TF, and black money. This multi-pronged strategy has brought these measures in line with international standards and proven effective.

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.

The release said that over two years, the Department of Revenue (DoR) spearheaded India’s engagement with FATF during the mutual evaluation process. This success was driven by exceptional efforts and contributions from 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 organizations, financial institutions, and businesses. This collaborative effort demonstrated India’s effective (Anti Money Laundering and Combatting the Financing of Terrorism) AML/CFT framework.

Already a member of the FATF Steering Group, India’s current performance provides an opportunity to contribute significantly to the group’s overall functioning. India remains committed to further strengthening its AML/CFT framework and continuing collaboration with international partners to combat financial crimes and build on its success to ensure a secure and transparent financial environment for all, the release said.

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.