The Financial Action Task Force (FATF) has released its Mutual Evaluation Report (MER) on India, focusing on the country's Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) measures. India has been placed in the "regular follow-up" category, reflecting its strong compliance with FATF standards. This is a significant recognition of India’s ongoing efforts to combat money laundering (ML) and terrorist financing (TF).
Key Highlights of the MER
Areas for Improvement: The report identifies certain areas where India could enhance its efforts, including a deeper understanding of money laundering and terror financing risks, improved national coordination, and better use of financial intelligence to address ML and predicate offences related to TF investigations.
Sources of Money Laundering: The primary sources of ML in India stem from illegal domestic activities, including cyber-enabled fraud, corruption, and drug trafficking.
Security Threats: Terrorism threats persist, especially from groups linked to Islamic State and al-Qaeda in and around Jammu and Kashmir. India also faces threats from regional insurgencies in the Northeast and Left-Wing Extremist groups.
Challenges in PMLA Implementation: Although investigations under the Prevention of Money Laundering Act (PMLA) have increased, there has not been a corresponding rise in prosecution complaints and completed trials.
Key Recommendations
Financial Sanctions: The report recommends implementing targeted financial sanctions to ensure the freezing of funds and assets without delay.
Definition of Politically Exposed Persons (PEPs): It suggests defining domestic PEPs under the PMLA, as only foreign PEPs are currently covered.
NPOs and Terrorist Abuse: Enhancing risk-based measures to protect Non-Profit Organizations (NPOs) from potential terror financing abuse is another critical recommendation.
India’s Status in the FATF Review
India is one of only five G20 countries, alongside the UK, France, Italy, and suspended Russia, to be placed in the "regular follow-up" category. This distinction means India will undergo reviews every three years, unlike developing nations in the "enhanced follow-up" category, which must submit reports annually.
The Mutual Evaluation Report is a thorough assessment of a country’s efforts to combat money laundering, terrorist financing, and the proliferation of weapons of mass destruction. For India, the report serves as both recognition of its progress and a roadmap for addressing future challenges in these crucial areas.
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