Context:
India has achieved an outstanding outcome in the Mutual Evaluation during 2023-24 by the Financial Action Task Force (FATF).
Key Highlights:
- India’s performance on the FATF Mutual Evaluation demonstrates the overall stability and integrity of the financial system.
- India had reached a high level of technical compliance with its requirements.
- The country’s anti-money laundering (AML), countering the financing of terrorism (CFT), and counter-proliferation financing (CPF) regime was achieving good results.
- Good rating will lead to better access to global financial markets and increase investor confidence. It will also help in the global expansion of the Unified Payments Interface (UPI), India’s fast payment system.
- The recognition from the FATF is a testament to the rigorous and effective measures implemented by India over the last 10 years to safeguard its financial system from money laundering (ML) and terrorist financing (TF).
A Top Performer:
- The Mutual Evaluation Report, adopted in June 2024, placed India in the “regular follow-up” category – a distinction shared by only a handful of G20 countries.
- This rating reflects India’s robust measures to mitigate ML/TF risks.
Effective Strategies:
- The FATF acknowledged India’s efforts on several fronts, including:
- Implementing effective measures to transition from a cash-based to a digital economy, thereby reducing ML/TF risks.
- Utilizing the JAM (Jan Dhan, Aadhaar, Mobile) Trinity along with stricter cash transaction regulations to make financial activities more traceable.
Benefits of a Strong System:
- Enhanced Access to Global Markets: India can expect better access to global financial markets, potentially attracting more foreign investment.
- Increased Investor Confidence: The positive rating can boost investor confidence in the Indian economy.
- Global Expansion of UPI: This recognition might aid the global expansion of India’s fast-growing Unified Payments Interface (UPI) system.
The Financial Action Task Force (FATF)
- It is an intergovernmental organization established in 1989 (based in Paris) by the G7 as the international watchdog to combat money laundering, terrorist financing, and other related threats to the integrity of the international al financial system.
- It originally included the G7 countries, the European Commission and eight other countries.
- India became a member of FATF in 2010.
- In 2001, the FATF expanded its mandate to also combat terrorist financing.
- The FATF identifies jurisdictions with weak measures to combat money laundering and terrorist financing (AML/CFT) in two FATF public documents that are issued three times a year.
- The FATF maintains a grey list and a black list to identify countries that have strategic deficiencies in their anti-money laundering (AML) and counter-terrorist financing (CTF) regimes.
- Black List: This statement, (previously called “Public Statement”), identifies countries or jurisdictions with serious strategic deficiencies to counter money laundering, terrorist financing, and financing of proliferation.
Countries under blacklist.
- Democratic People’s Republic of Korea
- Iran
- Myanmar
- Grey List: This statement identifies countries that are actively working with the FATF to address strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing.