India achieved a significant milestone in the Mutual Evaluation conducted by the Financial Action Task Force (FATF) during 2023-24, as highlighted in the Mutual Evaluation Report adopted at the FATF plenary in Singapore from June 26 to June 28, 2024. The report placed India in the ‘regular follow-up’ category, a distinction shared by only four other G20 countries. This achievement underscores India’s effective measures in combating money laundering (ML) and terrorist financing (TF).
Key highlights from the Mutual Evaluation Report include:
1. **Risk Mitigation:** India successfully mitigated risks arising from ML/TF, including proceeds from corruption, fraud, and organized crime. Effective measures have been implemented to transition from a cash-based to a digital economy, reducing ML/TF risks significantly.
2. **JAM Trinity Implementation:** The implementation of Jan Dhan, Aadhaar, Mobile (JAM) Trinity, along with stringent regulations on cash transactions, has enhanced financial inclusion and made transactions more traceable. This has contributed to mitigating ML/TF risks.
3. **Financial System Integrity:** India’s performance in the FATF Mutual Evaluation reflects the stability and integrity of its financial system. Good ratings will facilitate better access to global financial markets, increase investor confidence, and support the global expansion of the Unified Payments Interface (UPI).
4. **International Standards and Commitment:** The recognition from FATF demonstrates India’s commitment to international standards in combating financial crimes. It sets a benchmark for regional countries to implement effective measures against terrorist financing and align with international standards.
5. **Legislative and Enforcement Efforts:** Since 2014, India has enacted legislative changes and bolstered enforcement efforts to tackle ML, TF, and black money. These efforts have aligned India’s measures with international standards and yielded positive results.
6. **Collaborative Approach:** Success in the Mutual Evaluation was driven by a collaborative effort involving various ministries, the National Security Council Secretariat (NSCS), state authorities, judiciary, financial sector regulators, self-regulatory organizations, financial institutions, and businesses. This multidisciplinary approach showcased India’s effective Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) framework.
India’s excellent rating in the FATF Mutual Evaluation not only enhances its global standing but also positions it to lead efforts in countering cross-border terror financing and money laundering. As a member of the FATF Steering Group, India’s current performance will contribute significantly to the organization’s ongoing initiatives and global efforts against financial crimes.
The FATF, established in 1989, plays a crucial role as an international watchdog in combating ML, TF, and threats to the integrity of the international financial system. India’s membership in FATF since 2010 underscores its commitment to global financial integrity and adherence to international norms.
