India shares distinction with four G20 nations in FATF report for fighting money laundering, terrorism financing

Financial Action Task Force (FATF), a global agency that develops policies to combat money laundering and terrorism financing, has placed India in its ‘regular follow-up category’ after an evaluation during 2023-24, the finance ministry said, describing the evaluation result as an “outstanding outcome.” It is a distinction shared by only four G20 countries, the finance ministry said.

The mutual evaluation report of India adopted in the FATF plenary held in Singapore between 26 June and 28 June "marks a significant milestone in the country's efforts to combat money laundering (ML) and terrorist financing (TF)," the finance ministry said.

FATF sets international standards to prevent economic and financial crimes. It has recognised the efforts made by India on mitigating the risks arising from money laundering and terrorism financing, including the laundering of proceeds from corruption, fraud, and organised crime, the finance ministry statement said.

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‘Regular follow up,’ the top category, means India needs to submit progress report on recommended actions only in October 2027. Certain other countries in the ‘enhanced follow up’ category will have to submit follow up report every year. The other two categories are ‘grey list’ and ‘black list’.

A person informed about the FATF review explained that the FATF evaluation and rating are very stringent and getting placed in the top category is a tall order. Regular follow-up for India means that no fundamental or significant deficiencies were found in the review.

Effective measures implemented by India to transition from a cash-based to a digital economy and the implementation of the Jan Dhan, Aadhaar, Mobile (JAM) trinity, along with stringent regulations on cash transactions, have also been recognised by the FATF, the statement added.

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"India’s performance on the FATF Mutual Evaluation accrues significant advantages to our growing economy, as it demonstrates the overall stability and integrity of the financial system," the finance ministry said.

"Good ratings will lead to better access to global financial markets and institutions and increase investor confidence. It will also help in the global expansion of the Unified Payments Interface (UPI), India’s fast payment system," the ministry said.

Experts said that FATF placing India in the ‘regular follow-up’ category after an 18-month long mutual evaluation process is a recognition of India’s constant efforts to move towards a digital economy to ensure that cash infusion in the main financial stream is traceable.

“Since all the FATF member countries are subject to post-assessment monitoring, the mutual evaluation report is not the end of the process, rather a starting point for the country to further strengthen its measures to curb money laundering and terror financing,” said Amit Maheshwari, tax partner, AKM Global, a tax and consulting firm, states. Maheshwari also said that given India’s global commitment to international standards against financial crimes, an amendment to Prevention of Money Laundering Act (PMLA) can be expected in the days to come for making the offence of money-laundering a standalone offence.

“India’s excellent rating will enhance the capacity of our country to lead the global effort on countering cross border terror financing and money laundering,” the finance ministry said, adding that since 2014, the government has enacted a series of legislative changes and bolstered enforcement efforts to tackle money laundering, terror financing and black money.

India remains committed to further strengthening its anti-money laundering and countering the financing of terrorism framework and continuing its collaboration with international partners to combat financial crimes, the ministry said.