India Achieves an ‘Outstanding Outcome’ in FATF Mutual Evaluation

Source: TheHindu

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Context: FATF Recognises India’s Efforts To Combat Money Laundering, Terrorist Financing

Details

Evaluation by FATF

• The evaluation by FATF highlights India’s effective measures to combat money laundering (ML) and terrorist financing (TF), including transitioning from a cash-based to a digital economy, implementing the JAM (Jan Dhan, Aadhaar, Mobile) Trinity, and enforcing strict cash transaction regulations. 
• Adopted during the FATF plenary in Singapore from June 26-28, the Mutual Evaluation Report places India in the ‘regular follow-up’ category, shared by only four other G20 countries.
• This milestone enhances India’s access to global financial markets, boosts investor confidence, and supports the global expansion of the Unified Payments Interface (UPI).

Measures by India

• India has reached a high level of technical compliance with FATF requirements and its AML/CFT/CPF [anti-money laundering/ countering the financing of terrorism/ counter proliferation financing] regime is achieving good results, including in its ML [money laundering] and TF [terrorist financing] 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.
• Indian government had apprised FATF and peers about amendments in the Prevention of Money Laundering Act (PMLA), registration of more than 5,000 money laundering cases in the past 10 years, the arrest of 755 individuals and attachment of properties worth more than ₹1.21 lakh crore.
• The Indian government widened the ambit of PMLA to bring non-government organisations and crypto-currencies under it, so that illicit financial transactions through virtual digital assets (VDAs) can be monitored.
• The Reserve Bank of India (RBI) has stepped up scrutiny of fintech firms to ensure they follow the provisions of the anti-money laundering law, and is keeping tabs on suspicious transactions.
• The Fugitive Economic Offenders Act of 2018 empowers authorities for non-conviction-based attachment and confiscation of assets and proceeds of crime abroad in cases involving amounts more than ₹100 crore.

Suggestions by FATF

• Improvements are needed to strengthen the supervision and implementation of preventive measures in some of the nonfinancial sectors.
• India 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 NPOs [non-profit organisations] on their TF risks.

Earlier review reports on India

• India’s mutual evaluation of FATF guidelines was last done in 2010.
• The mutual evaluation of India was scheduled for September 2020, but was delayed because of the Covid-19 pandemic.

FATF and The Mutual Evaluations

FATF

• The Financial Action Task Force (FATF) is an intergovernmental organization that designs and promotes policies and standards to combat financial crime.
• Recommendations created by the Financial Action Task Force (FATF) target money laundering, terrorist financing, and other threats to the global financial system.
• The FATF was created in 1989 at the behest of the G7 and is headquartered in Paris.
• FATF members include 39 countries, including the United States, India, China, Saudi Arabia, Britain, Germany, France, and the EU as such.
• India became a member of FATF in 2010.
• FATF 'grey list' and 'blacklist':
  • Black List: Countries known as Non-Cooperative Countries or Territories (NCCTs) are put on the blacklist. These countries support terror funding and money laundering activities. The FATF revises the blacklist regularly, adding or deleting entries.
  • Grey List: Countries that are considered a safe haven for supporting terror funding and money laundering are put on the FATF grey list. This inclusion serves as a warning to the country that it may enter the blacklist.
• Three countries North Korea, Iran, and Myanmar are currently in FATF’s blacklist.
• Consequences of being on the FATF blacklist:
  • No financial aid is given to them by the International Monetary Fund (IMF), the World Bank, the Asian Development Bank (ADB) and the European Union (EU).
  • They also face a number of international economic and financial restrictions and sanctions.

Mutual evaluations

• FATF mutual evaluations are in-depth country reports analysing the implementation and effectiveness of measures to combat money laundering, terrorist and proliferation financing.
• During a mutual evaluation, the assessed country must demonstrate that it has an effective framework to protect the financial system from abuse.
• Mutual Evaluations have two main components, effectiveness and technical compliance.

• Effectiveness ratings: This is the focus of an on-site visit by a team of experts to the assessed country.  During this visit, the assessment team will require evidence that demonstrates that the assessed country’s measures are working and delivering the right results.
• Technical compliance:  is also an important part of a mutual evaluation. The assessed country must provide information on the laws, regulations and any other legal instruments it has in place to combat money laundering and the financing of terrorism and proliferation. 

• The FATF conducts peer reviews of each member on an ongoing basis to assess levels of implementation of the FATF Recommendations, providing an in-depth description and analysis of each country’s system for preventing criminal abuse of the financial system.

Conclusion

India’s need of “improvement” in the supervision and “implementation” of preventive policies in certain non-financial sectors.

Sources:

DDNews,HindustanTimes,FATF

PRACTICE QUESTION Q. With reference to the Financial Action Task Force (FATF), consider the following statements: 1. It is an inter-governmental body dedicated to combating money laundering and terrorist financing. 2.It is headquartered in Paris,France. 3. India is a founding members of FATF. How many of the statements given above are correct? A.Only one B.Only two C.All three D.None Answer B