FATF asks India to speed money laundering cases

New Delhi: Global terror financing global watchdog Financial Action Task Force (FATF) on Thursday placed India in the “regular follow-up” category, a distinction it now shares with only three other G20 countries—the UK, France and Italy. 

FATF said India has achieved a high level of technical compliance across the agency's spectrum of recommendations while taking significant steps to implement measures to tackle illicit finance. 

However, the Paris-headquartered body, founded by the G7, said India needs to address a backlog in money laundering cases pending the conclusion of court processes.

FATF also said India has to improve the implementation of cash restrictions by dealers in precious metals and stones as a priority, given the importance of the sector.

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"India faces serious terrorism and terrorist financing threats, including related to ISIL or Al Qaeda. India has a strong emphasis on disruption and prevention and has demonstrated its ability to conduct complex financial investigations. However, India needs to focus on concluding the prosecutions and convict and appropriately sanction terrorist financiers," FATF's Mutual Evaluation Report: September 2024 said.

"The country needs to ensure that measures aimed at preventing the non-profit sector from being abused for terrorist financing are implemented in line with the risk-based approach, including by conducting outreach to non-profit organisations on their terrorist financing risks," the report added.

India became a member of FATF in 2010 to help fight money laundering and terrorism financing and to secure a more stable and transparent financial system.

In its latest report, FATF said India was "compliant" and "largely compliant" on 37 out of 40 parameters evaluated as part of its assessment.

"India has made significant steps in financial inclusion, more than doubling the proportion of the population with bank accounts, encouraging greater reliance on digital payment systems, and making use of simplified due diligence for small accounts. These efforts have supported financial transparency, which in turn contribute to anti-money laundering and counter-terrorist financing efforts," the report said.

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"Despite the size and institutional complexity of the Indian system, Indian authorities cooperate and coordinate effectively on matters dealing with illicit financial flows, including the use of financial intelligence. India also achieved positive results in international cooperation, asset recovery and implementing targeted financial sanctions for proliferation financing," it added.

The report noted that the number of money laundering convictions has been significantly impacted by a series of constitutional challenges with many cases pending trial and the saturation of the court system observed.

"Although numbers of prosecutions and convictions have started to increase, the backlog of pending cases remains considerable, with a large number of accused persons awaiting the conclusion of their trials," the report said.

"This also impacts the extent to which confiscation of criminal proceeds is carried out, in particular, the ML (money laundering) cases that the ED is responsible for, although India has confiscated proceeds via non-conviction-based confiscation including in some significant cases," it added.

A senior finance ministry official, who spoke to the media after the release of the latest FATF report, said while the government is working on speeding up the prosecution and conviction processes, key measures taken by it in the past helped it get better ratings from the FATF.

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"We are inducting more prosecutors to expedite the trials," said Vivek Aggarwal, additional secretary at the department of revenue.

Aggarwal said the government is hopeful of getting fugitives like Vijay Mallya and Nirav Modi, who have been accused of money laundering, back to the country. "In the case of Mallya, it is a political decision which the government of the UK has to take," he said.

“I am hopeful that these fugitives will be brought back to India soon.”

Aggarwal said India plans to carry out a risk assessment every three years and regularly follow up with the FATF.

"So, far we have passed with distinction. India has no low rating on any parameters (as per the latest FATF report), as it is either high or medium rating," he added.