Anti-terror watchdog lauds India’s efforts, warns of severe threats from...

PTC News Desk: The Financial Action Task Force (FATF), an international watchdog for combating money laundering and terrorist financing, has recognised India’s significant progress in adhering to its recommendations. In a report released on Thursday, the FATF praised India for its high level of technical compliance and notable advancements in implementing measures against illicit financial activities.

However, it also highlighted areas where improvements are needed as the country's economy continues to expand.

India’s Progress and Challenges

The FATF’s mutual evaluation report, which involved assessments by FATF, the Asia/Pacific Group on Money Laundering (APG), and the Eurasian Group (EAG), acknowledged that India has established an effective anti-money laundering and counter-terrorist financing (AML/CFT) framework.

Notable achievements include improvements in understanding financial risks, accessing beneficial ownership information, and depriving criminals of their assets. Indian authorities have effectively utilized financial intelligence and demonstrated strong domestic and international cooperation.

Despite these successes, the report pointed out that India must address specific areas to enhance its system. Key challenges include the need for expedited trials for money laundering and terrorist financing cases, as well as dealing with a backlog of pending cases.

The report noted that while India has made progress in addressing fraud and corruption-related money laundering, there is a need for increased focus on human trafficking and drug trafficking offenses.

Terrorism and Terrorist Financing Threats

The FATF report also highlighted serious threats related to terrorism and terrorist financing in India, particularly concerning groups like ISIL (Islamic State of Iraq and the Levant) and al-Qaeda active in Jammu and Kashmir.

The report praised India’s efforts in disruption and prevention, as well as its capability to conduct complex financial investigations. However, it emphasised the need for faster prosecutions and effective sanctions against terrorist financiers.

Additionally, the report stressed the importance of implementing measures to prevent abuse of the non-profit sector for terrorist financing. It recommended a risk-based approach, including outreach to relevant organizations.

Financial Inclusion and Cooperation

The FATF report lauded India’s strides towards financial inclusion. It noted that the proportion of the population with bank accounts has more than doubled, due diligence for small accounts has been enhanced, and the reliance on digital payment systems has increased. These initiatives have supported financial transparency and contributed to efforts against money laundering and terrorist financing.

The report highlighted that despite the complexity of India’s financial system, authorities effectively coordinate and cooperate on issues related to illicit financial flows. India has achieved positive results in international cooperation, asset recovery, and implementing targeted financial sanctions for proliferation financing.

Future Outlook

India’s understanding of money laundering, terrorism, and proliferation financing risks is well-established, according to the report. However, it suggested that insights into these risks need to be shared more broadly with stakeholders. While there is a good understanding and application of preventative measures in the financial sector, especially among commercial banks, smaller financial institutions need to improve their risk management practices.

Following this assessment, India has been placed in the “regular follow-up” category. As per FATF procedures, India will report back to the Plenary in three years to update on its progress.

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