India informs FATF of steps taken on money laundering, terror funds

An Indian delegation visited Singapore last month to apprise the Financial Action Task Force (FATF) about steps taken to counter money laundering and terror financing over the past decade ahead of the global watchdog’s presentation of its report of a review of Indian mechanisms.

The FATF, an intergovernmental organisation, is set to present its report on its “mutual evaluation” or periodic review of India’s efforts to fight money laundering and terror financing next month. The Indian team comprising officials from the Enforcement Directorate (ED), income-tax department, Central Bureau of Investigation (CBI), Directorate of Revenue Intelligence (DRI), and the finance and external affairs ministries visited Singapore in April for face-to-face consultations on the evaluation, people familiar with the development said.

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The discussions focused on steps taken by New Delhi since 2010, when India last underwent such a review, the people said on condition of anonymity. The mutual evaluation was scheduled for September 2020, but was delayed because of the pandemic.

During the meeting, the Indian delegation informed the FATF and peers about notable 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. These steps deterred elements such as organised gangs, terrorists and white-collar criminals, the officials said.

A key change since the last review has been defining a “politically exposed person” under the PMLA, which was recommended by the FATF. Besides, the Indian government has 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 are following the provisions of the anti-money laundering law, and it is keeping tabs on suspicious transactions, they said.

The government also enacted a new law in 2018 to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of local courts. The Fugitive Economic Offenders Act, 2018, empowers authorities for non-conviction-based attachment and confiscation of assets and proceeds of crime abroad in cases involving amounts above ₹100 crore.

“The team, including ED officials, participated in the face-to-face discussions and discussed steps taken by India to meet the AMT/CFT (anti-money laundering/combating the financing of terrorism) requirements. Compared to many countries, we have done a great job in this area. In fact, several countries are adopting our model,” a government official said.

Officials exuded confidence that India will not face any red flags in the FATF review. India is currently in the “compliant” category for key criteria and is expected to remain there, with some of the steps taken by New Delhi likely to be recommended to other countries.

Indian regulators and agencies have taken more than enough action against fintech companies and violations of money laundering laws, officials said.

The FATF conducts peer reviews of each member country to assess the implementation of its recommendations and provides an in-depth description and analysis of each country’s system. In 2019, the Indian government set up a joint working group comprising 22 central investigation, intelligence and regulatory agencies to make presentations, hold discussions with, and brief the FATF experts.

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The agencies involved in the process include the ED, the income-tax department, DRI, CBI, Financial Intelligence Unit, Customs, market regulator Securities and Exchange Board of India, banking regulator RBI and Insurance Regulatory and Development Authority of India.

Over the past few years, the ED has aggressively gone after businessmen, politicians and companies involved in money laundering by violating the rules laid down by the government and regulatory authorities, even as provisions of the PMLA have been described by many political parties, lawyers and businessman as “draconian”.

The courts have, however, upheld most of its arrests and prosecution complaints that are equivalent to charge sheets.

Timeline:

Currently India is in “compliant” category

India’s last mutual evaluation was done in June 2010. For the June 2024 plenary, an on-site evaluation was done by FATF in November 2023.

A team of officers travelled for face-to-face discussions on steps taken by the Indian government on AMT/CFT since the last evaluation in 2010.