The Financial Action Task Force (FATF), the global money laundering and terrorism financing watchdog, has endorsed India’s digital stack — the JAM trinity and Unified Payment Interface (UPI) — for its overall low vulnerability.
The latest edition of FATF’s ‘Money Laundering National Risk Assessment Guidance’ recognised India’s financial inclusion mechanism of combining Aadhaar identification, Jan Dhan accounts and mobile numbers (popularly known as JAM trinity) as an effective tool for formalising financial transactions.
“Significant transactions in the informal economy in
The Financial Action Task Force (FATF), the global money laundering and terrorism financing watchdog, has endorsed India’s digital stack — the JAM trinity and Unified Payment Interface (UPI) — for its overall low vulnerability.
The latest edition of FATF’s ‘Money Laundering National Risk Assessment Guidance’ recognised India’s financial inclusion mechanism of combining Aadhaar identification, Jan Dhan accounts and mobile numbers (popularly known as JAM trinity) as an effective tool for formalising financial transactions.
“Significant transactions in the informal economy in India happen in cash. Based on India’s assessment of the risks associated with cash, India introduced policies (known as Jan Dhan, Aadhaar and Mobile) to encourage use of the formal financial system. These policies expanded affordable access to bank accounts and other financial services, using a biometric identification system and supported the development of a digital mobile payment system,” the FATF document published earlier this month said.
The document aids countries in assessing money laundering menaces and help them to mitigate such risks.
The FATF’s endorsement came close on the heels of its evaluation report published in mid-September that certified India’s robust compliance system on 40 evaluation parameters. The report placed India on the FATF’s exclusive club of top performers, surpassing the US, China, Germany, Japan and Canada for maintaining higher standards in curbing money laundering and terror financing through various measures, including its transparent and globally acclaimed digital India stack.
India stack is a collection of technology products owned and maintained by different agencies such as the Unique Identification Authority of India (UIADI), the ministry of electronics and information technology (MeitY), the National Payments Corporation of India (NPCI), and the Reserve Bank Information Technology Pvt Ltd (ReBIT).
The FATF document also endorsed India’s digital payment infrastructure (DPI). “India has prioritised the development of digital payment infrastructure, leading to a rapid increase in digital transaction volumes from 20.7 billion transactions in 2017-18 to 134.6 billion in 2022-23. As a result of these measures, access to financial services has increased from 35% of the total population in 2011 to 80% in 2017,” it said.
According to the Union government data, the number of such transactions crossed 18,592 crore (or 185.92 billion) in India in 2023-24 with value touching ₹3,658 lakh crore.
India’s indigenously developed digital payment system (UPI and RuPay cards) is getting international acceptance. UPI is already fully functional in the United Arab Emirates (UAE), Bhutan, and Singapore while expanding to Nepal, Mauritius, France, and Sri Lanka. RuPay cards are accepted in Nepal, Bhutan, Singapore, and the UAE.
India’s steps to promote financial inclusion are well calibrated in order to ensure “financial integrity” by designing financial inclusion products with in-built risk mitigating measures, the FATF document said. “A sectoral risk assessment concluded that the overall vulnerability of these financial products is low as far as they relate to ML/TF [money laundering/terrorism funding] therefore India has put in place simplified measures to allow broader access to the formal financial system,” it added.
The FATF document endorsed Indian system of customer due diligence (CDD) that work in financial institution as Know Your Customer (KYC) norms under the Prevention of Money Laundering Act (PMLA). It said popular Indian digital products have ensured that people with lower incomes have access to banking with simplified CDD under PMLA while opening of small accounts as well as other accounts for categories of clients that are low risk.
“The rules do not permit simplified measures where there is a suspicion of ML/TF, where specific higher-risk scenarios apply or where the risk identified is not consistent with the national risk assessment,” it added.
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