India to join exclusive FATF club on Sept 19 for maintaining higher standards
A report on India’s performance in curbing financial crimes gave the thumbs-up on 37 of 40 stringent evaluation parameters, a feat achieved by just three G20 members
India will join the Financial Action Task Force’s (FATF) exclusive club of top performers on September 19, surpassing the US, China, Germany, Japan, and Canada for maintaining higher standards in curbing money laundering and terror financing even as New Delhi leads a global initiative to bring greater transparency in online transactions and credit card payments, officials said on Tuesday.
The comprehensive report on India’s performance in curbing financial crimes gave the thumbs-up on 37 of 40 stringent evaluation parameters, a feat achieved by just three members of the G20 – the United Kingdom, France, and Italy, said the officials who did not wish to be named.
Officials said FATF’s mutual evaluation conducted in 2023-24 placed India in the top category of “regular follow-up” which allows India to meet the other three remaining parameters “voluntarily” but for the countries that fall in the next category of “enhanced follow-up” such as the US, China and Germany, meeting all shortcomings are mandatory.
According to FATF, such countries have to report back every year on the progress achieved or face action. They are, however, better off than the countries in the “grey list” where an action plan is given with monitoring of their implementations in every four months. If countries on the gray list fail to show any progress then they are pushed to “black-list” and subjected to counter-measures for example Myanmar. Countries that do not participate in FATF’s mutual evaluation process – for example, Iran and North Korea – are also black-listed.
The advantages of being in the top category (regular follow-up) are immense for India, the officials said. Countries in “regular follow-up” report back once in three years, which is voluntary. It improves the credibility and reputation of India as a financially stable and secure nation, making it more attractive for investments, an official said.
Besides that it improves cooperation with other countries in areas like countering terrorist financing, asset recovery, and law enforcement; increases access to international markets and lowers borrowing costs; and a good rating leads to increased access to international trade by increasing the trust of India’s trade finance instruments, he added.
India has reached “a high level of technical compliance” with the FATF, the global institution said in a statement on its website. It lauded India’s achievements in its money laundering and terror funding risk understanding, international cooperation, access to basic and beneficial ownership information, use of financial intelligence, and depriving criminals of their assets and counter-proliferation financing measures.
“However, improvements are needed to strengthen the supervision and implementation of preventive measures in some of the non-financial sectors,” FATF said. India also needs to address delays relating to concluding money laundering and terror funding prosecutions, it added.
The officials confirmed that the next major task of the global financial crime watchdog is to set the standard for transparent and expeditious disclosure of parties involved in online transactions either through payment aggregators or through plastic cards such as credit and debit cards. “India is playing a significant role in this effort while being mindful to strike a balance between regulations and ease,” the first official said.
“Intensive stakeholders’ consultation and industry outreach efforts will also be undertaken before finalising the standards. India is in favour of transparent disclosures. But regulations must not affect the ease of compliance and speed of transactions.”
Officials said that the matter is being debated in FATF and from India’s side, the Reserve Bank of India (RBI) is also in favour of enhanced mandatory disclosures and information exchange with FATF member countries. They said industry players, including Visa and MasterCard, are also involved in the discussions.
“As stakeholders have some apprehensions, we must find suitable solutions before implementing any standard,” the second official said. All decisions of the FATF are based on consensus, but, unlike the United Nations, no member enjoys veto rights.
FATF, the global watchdog on money laundering and terrorist financing, was formed in 1989. It is the apex standards-making body to prevent financial crimes. It makes countries comply with its standards through a rigorous process called “mutual evaluation”.
Its members are 38 countries and two regional bodies – the European Union and the Gulf Cooperation Council. Most of the other countries are part of FATF through nine associate member groups. Several multilateral institutions such as the World Bank and the United Nations enjoy observer status.