• The Financial Action Task Force (FATF) has lauded India’s efforts to implement measures to tackle illicit finance including money laundering and terror funding. 

• Vivek Aggarwal, Additional Secretary, Revenue, Ministry of Finance said that in its Mutual Evaluation Report for India ‘Anti-Money laundering and Counter terrorist financing Measures’ FATF emphasizes that India has achieved a high-level of technical compliance across the FATF recommendations. 

• India has taken significant steps to implement measures to tackle illicit finance, the report mentioned.

Highlights of the MER Report: 

• A joint FATF-APG-EAG assessment has concluded that India has implemented an anti-money laundering and counter-terrorist financing (AML/CFT) framework that is achieving good results. 

• Authorities make good use of financial intelligence and co-operate effectively, both domestically and internationally.

• India has been placed in “regular follow-up” which is the highest rating category by FATF.  UK, France and Italy are among the only G20 countries which have been placed in this category apart from India.

• The report highlights that 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. 

• These efforts have supported financial transparency, which in turn contribute to AML/CFT efforts.

What is Money Laundering and Terrorism Financing (ML/TF)?

• Money Laundering (ML) : Money laundering is concealing or disguising the origins of illegally obtained proceeds so that they appear to have originated from legitimate sources. It is frequently a component of other serious crimes such as drug trafficking, robbery or extortion.

Money laundering is omnipresent and found in areas where it might least be expected, such as environmental crimes. The advent of cryptocurrency, such as bitcoins, has exacerbated this phenomenon. According to the IMF, global Money Laundering is estimated between 2-5 per cent of World GDP.

• Terrorism Financing (TF): Terrorism financing refers to the means and methods that terrorist organisations use to finance activities that pose a threat to national and international security. 

• The money that enables terrorist organisations to carry out terrorist activities can come from both legitimate and criminal sources.

India’s efforts to combat Money Laundering and Terrorist Financing

National level efforts:

• Prevention of Money Laundering Act (PMLA), 2002: The PMLA is the cornerstone of India’s legal framework to combat money laundering. It provides comprehensive measures to prevent, control, and prosecute money laundering offenses. The Act also ensures the confiscation of property derived from or involved in money laundering activities.

• Enforcement Directorate (ED): The ED is the primary investigative agency responsible for enforcing the PMLA. It handles investigations, prosecutes offenders, and takes necessary actions to confiscate assets involved in money laundering cases.

• Financial Intelligence Unit-India (FIU-IND): FIU-IND acts as the national agency for receiving and analysing financial transaction reports. It detects suspicious transactions and provides relevant information to law enforcement agencies to tackle money laundering and terrorist financing.

• Regulatory Oversight by RBI: The Reserve Bank of India (RBI), along with other financial regulators, imposes stringent guidelines on banks and financial institutions. These include ensuring Know Your Customer (KYC) compliance, conducting enhanced due diligence, and reporting suspicious transactions to prevent money laundering.

• Global Level Efforts: Compliance with United Nations Conventions: India has ratified major UN conventions like the UN Convention Against Transnational Organized Crime (UNTOC) and the International Convention for the Suppression of the Financing of Terrorism. This aligns India’s framework with global norms on tackling terrorism and financial crimes.

• International Cooperation: India actively collaborates with global organizations such as Interpol and the United Nations Office on Drugs and Crime (UNODC). Through bilateral and multilateral agreements, India works on capacity-building initiatives and intelligence sharing to combat transnational money laundering and terrorist financing effectively.

(The author is a trainer for Civil Services aspirants.)