Fact Check
Terror Funding Watchdog FATF Praises India’s Anti-Money Laundering and Terror Financing Measures
The Financial Action Task Force (FATF) has published its mutual evaluation report regarding India’s anti-money laundering (AML) and counter-terrorist financing (CFT) efforts, recognizing the nation’s considerable advancements in tackling illicit finance. The report emphasizes India’s strong technical adherence to FATF recommendations, particularly in understanding risks, accessing beneficial ownership data, and stripping criminals of their assets.
India’s AML and CFT framework has yielded favorable results, such as enhanced financial transparency driven by greater financial inclusion, increased bank account accessibility, and the promotion of digital payment methods. Authorities are also utilizing financial intelligence effectively and collaborating well both domestically and on an international scale.
However, the report points out that domestic illegal activities—including fraud, corruption, and drug trafficking—pose significant money laundering risks in India. To mitigate these issues, India needs to focus on finalizing money laundering and terrorist financing cases, ensuring appropriate penalties for offenders, and adopting a risk-based approach for non-profit organizations.
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The report further underscores the importance of improving the sharing of information on money laundering, terrorism, and proliferation financing risks with relevant parties. While larger commercial banks exhibit a solid understanding of risks and preventive measures, smaller financial institutions are still catching up. Efforts to implement preventive strategies in the non-financial sector and among virtual asset service providers are still in their early stages.
To bolster its AML/CFT framework, India should also prioritize tightening cash restrictions for dealers of precious metals and stones, given the emerging threats from smuggling of these commodities. The country has been placed in the “regular follow-up” category and will provide updates to the FATF in three years.
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Overall, the report acknowledges India’s notable progress in combating money laundering and terrorist financing while also identifying areas that require further enhancement. This progress reflects India’s commitment to aligning its financial system with international standards and maintaining a secure financial environment.
India’s placement in the “regular follow-up” category is an encouraging sign, indicating that the country’s efforts to tackle illicit finance are progressing well. The next evaluation in three years will offer more insights into India’s advancements in addressing the highlighted areas for improvement.