zafar Iqbal
India’s efforts to combat illicit finance were recognized in the Mutual Evaluation Report released by the Financial Action Task Force (FATF) on September 18, 2024. The report commended India’s achievements in adhering to global anti-money laundering (AML) and Countering the Financing of Terrorism (CFT) standards.
The report acknowledged India’s significant compliance with FATF’s technical recommendations, positioning the country as a committed player in global financial security. This recognition underscores India’s unwavering commitment to maintaining the integrity of the global financial system. However, as India’s financial sector continues to expand, ongoing refinement of its regulatory framework, especially in prosecuting money laundering and terrorist financing offenses, is crucial.
India, with its extensive geographical coverage and federal legal system grounded in common law, plays a central role in regional security and economic collaboration. The country has steadily strengthened its legislative and institutional framework to address financial crimes, including the implementation of the Prevention of Money Laundering Act, 2005.
India’s journey toward aligning with international financial standards began with its application for membership in the Asia Pacific Group (APG) on money laundering in 1998. The establishment of the Financial Intelligence Unit (FIU) in 2004 further enhanced the nation’s capacity to track and counter illicit finance. In 2010, after more than a decade of sustained efforts, India secured full membership of FATF, marking a significant milestone in its commitment to global financial integrity.
The latest Mutual Evaluation Report provides an updated evaluation of India’s progress in addressing deficiencies highlighted in the earlier review. It highlights India’s significant progress in implementing an effective AML and CFT framework, commending the country’s robust system for understanding risks, accessing beneficial ownership information, and depriving criminals of their illicit assets. This steady progress instills optimism about India’s future in combating financial crimes.
While India has demonstrated a good understanding of risks and obligations in the financial sector and preventive measures are steadily advancing, the report also identifies areas for improvement, such as addressing specific threats like human trafficking, migrant smuggling, and ML/TF risks linked to the trade of precious metals and stones.
India is advised to address the backlog of money laundering trials and increase the number of convictions by enhancing the court system’s capacity. The report also emphasizes the urgent need for India to ensure immediate compliance with Targeted Financial Sanctions (TFS) to better combat financial crimes. This underscores the urgency of the situation and the need for swift action.
In terms of effectiveness, India achieved a substantial level in six areas, with moderate effectiveness in five others, indicating a need for continued improvement.
On the other hand, Pakistan has faced challenges in achieving satisfactory levels of both technical compliance and effectiveness, leading to its placement on the FATF ‘grey list’ multiple times. The country is urged to prioritize improving its compliance with FATF standards by focusing on strengthening financial intelligence units, enhancing law enforcement capabilities, and addressing existing legislative gaps.
Implementing these reforms can enable Pakistan to formally apply for FATF membership, a critical step that has been delayed due to negligence.
