Global anti-money laundering watchdog says India compliant with requirements, flags concerns

The watchdog said that India needs to address delays relating to concluding money laundering (ML) and terrorist financing (TF) prosecutions and ensure that CFT measures aimed at preventing the non-profit sector from being “abused” for TF are implemented in line with risk-based approach. A source seeking anonymity said that all of the issues flagged by FATF would be addressed in due course and that India will analyse the FATF’s detailed report where the agency is expected to give its full recommendation. The person said that a fresh national risk assessment is also due in 2025.

“But again the issues flagged by FATF are not significant deficiencies. Non-financial sectors such as real estate agents, dealers in precious metals and stones, professional accountants, Virtual asset service providers (VASPs) were brought under Prevention of Money Laundering Act (PMLA) very recently. India substantiated the sustainability of the framework,” the source added.

Improvements needed

The FATF discussed and adopted the joint Financial Action Task Force mutual evaluation report of India which assessed the effectiveness of India’s measures to combat ML, TL and proliferation financing, and their compliance with the FATF Recommendations, the agency said. “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,” the FATF statement said.

“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 NPO on their TF risks,” the statement added.

Action on NGOs

FATF’s comment comes after the Enforcement Directorate (ED) in 2022 provisionally attached assets worth Rs 1.54 crore belonging to Indians for Amnesty International Trust (IAIT) in connection with its money laundering probe into the finances of Amnesty International and its related entities. ED’s case was based on a CBI FIR against Amnesty for alleged violation of the Foreign Contributions Regulatory Act (FCRA), 2010.

In 2015, the government had blocked foreign fundings to Greenpeace India by suspending its licence for six months. The decision was taken by the Home Ministry after it was found that the NGO has “prejudicially affected the public interests and economic interests of the country in violation” of the Foreign Contribution Regulation Act.

Earlier this year, Centre for Policy Research (CPR) received its final order cancelling its licence under the Foreign Contribution Regulation Act (FCRA). The CPR, established in 1973 and one of the country’s premier public policy think tanks, has seen its fortunes reversed since September 2022 when it was subjected to a survey by the Income Tax (IT) Department.

FATF on other countries

At this Plenary, the FATF added Monaco and Venezuela to the list of jurisdictions subject to increased monitoring. It said Kuwait should also focus on preventing the misuse of legal persons and on applying targeted risk-based measures to protect the non-profit sector from TF abuse. The watchdog in its statement said that Jamaica and Türkiye made significant progress in addressing the strategic AML and CTF deficiencies previously identified.

FATF said that suspension on the Russian Federation continues to stand. This comes after the watchdog in March 2022 highlighted that all jurisdictions should be vigilant to current and emerging risks from the “circumvention of measures” taken against the Russian Federation in order to protect the international financial system.

The watchdog reiterated its concerns over North Korea’s continued failure to address the significant deficiencies in its AML and combating the TF regime, and the serious threats posed by the country’s illicit activities related to the proliferation of weapons of mass destruction and its financing.

India’s efforts in FATF’

Notably, a multi-disciplinary team was constituted with the Department of Revenue steering the mutual evaluation process. The team was headed by Vivek Aggarwal, Additional Secretary, Revenue, who defended India’s case before FATF. A joint working group of more than 150 officers from several ministries including home, external affairs and agencies such as Enforcement Directorate (ED), Central Bureau of Investigation (CBI) were also involved, Finance Ministry said in a statement

“A team of about 25 officers headed by Aggarwal were part of the delegation to Singapore to present its case. Aggarwal is the Head of Delegation to FATF from 2022 and has voiced India’s position on various FATF matters in the plenaries. He is also holding additional charge as Director, FIU-IND. India is also a Member of the Steering Group of FATF,” the ministry added.