FATF lauds India for anti-terror funding efforts, flags concerns

The Paris-based global monitor of terror funding, Financial Action Task Force (FATF), has flagged some concerns while also commending India for its robust measures against the financing of terrorist groups such as ISIL and Al Qaeda.

While noting India’s success in implementing effective preventive strategies and its capability to conduct detailed financial investigations, the FATF cautioned in a report that the country needs to focus on concluding the prosecutions, convicting terrorist financiers, and appropriately sanctioning them.

It said the country must address the backlog of money laundering cases, and concluded that though authorities have a comprehensive understanding of the money laundering, terrorism, and proliferation financing risks, they must share their insights with all relevant stakeholders.

The FATF, an intergovernmental body set up in 1989 by the G7 to develop anti-money laundering policies and later to include terror funding in 2001, emphasized the need for India to further strengthen its systems as the economy and financial sector expand.

It has also asked authorities to tighten scrutiny of transactions where precious metals and stones are involved as most of these are conducted in cash and do not come under usual monitoring procedures. India, one of the biggest importers of gold, is also a key exporter of diamond jewelry.

It also highlighted the necessity of completing trials, imposing appropriate penalties for money laundering and terrorist financing, and employing a risk-based educational approach for non-profit organizations.

The FATF also pointed out that India’s major money laundering threats stem from domestic illegal activities such as cyber fraud, corruption, and drug trafficking.

While compliance with international norms is maintained, particularly in fraud and forgery cases, more rigorous actions are required against human and drug trafficking.

The FATF also recommended that India employ a risk-based strategy to prevent misuse of the non-profit sector for terrorist financing, which includes educating these organizations about their risks.

Additionally, the FATF commended India for doubling bank accounts, promoting digital payments, and simplifying due diligence for small accounts, which enhance financial transparency and inclusion.

Despite challenges due to the vast and complex institutional framework, India has shown effective cooperation and coordination in handling illicit financial flows, achieving commendable results in international cooperation, asset recovery, and implementing targeted financial sanctions for proliferation financing, it said.

The report summarizes India’s anti-money laundering and counter-terrorist financing measures, assessing compliance with the FATF’s 40 recommendations—comprehensive guidelines aimed at fighting money laundering, terrorist financing, and the proliferation of weapons of mass destruction—during their evaluation from 6 to 24 November 2023.