FATF review of India’s anti-money laundering, terror financing regime postponed again to 2022

PTI, Jul 18, 2021, 1:44 PM IST

New Delhi: An evaluation by the global organisation Financial Action Task Force (FATF) to analyse the effectiveness of India’s anti-money laundering and countering terrorist financing regime has been postponed for the second time in view of the ongoing COVID-19 pandemic and is now slated to be initiated next year, officials said.

The scheduled assessment for the country by the Paris-headquartered watchdog was originally slated for September-October, 2020.

However, these dates were postponed and pushed to February this year by the FATF secretariat in view of the coronavirus outbreak that gripped the world, including India.

”The schedule for FATF mutual evaluation has again been postponed from February 2021 and it is tentatively expected to begin in September 2022 now,” a senior government officer said.

As per this re-scheduled assessment calendar, the technical evaluation of Indian anti-money laundering, countering terrorist financing and the role of relevant legal framework and agencies enforcing these measures would begin in September next year followed by an on-site visit of FATF experts to the country in February 2023, another official privy to the development said.

The FATF plenary that is expected to be held in October 2023 will discuss the Indian assessment and its mutual evaluation report will be published for public consumption after 10 months from the date of the on-site visit (February 2023), he said.

The FATF is a global money laundering and terrorist financing watchdog that sets international standards to prevent economic and financial crimes in a country with inter-connected linkages across the world.

It conducts ”peer reviews of each member on an ongoing basis to assess levels of implementation of the FATF recommendations and provides an in-depth description and analysis of each country’s system for preventing criminal abuse of the financial system.”

The last such review of India’s anti-money laundering and terrorist financing regime was held in June 2010 and it is usually taken up again after a period of 10 years.

The FATF, post this review, had said in 2013 that ”India had made significant progress in addressing deficiencies identified in its mutual evaluation report and (the FATF) decided that the country should be removed from the regular follow-up process.”

In 2019, India had set up a joint working group comprising 22 central investigation, intelligence gathering and regulatory agencies to make presentations, hold discussions and brief the FATF experts, drawn from various countries, once the process starts.

Some of the prominent agencies in this grouping supervised by the Department of Revenue under the Union Finance Ministry include the Enforcement Directorate, Income Tax Department, Directorate of Revenue Intelligence, Financial Intelligence Unit (FIU), CBI, Customs Department, market regulator SEBI, banking regulator RBI and insurance regulator IRDAI.

The FATF too made a public declaration saying the dates for the mutual evaluation of certain countries including India ”will be rescheduled as soon as practicable.”

”Due to the ongoing COVID-19 emergency, the FATF and FATF-style regional bodies (FSRBs) are implementing precautionary measures that impact scheduled on-site visits and mutual evaluation discussions. As the situation evolves, this information will be regularly updated but remains subject to further change,” it said.

It specifically says India’s possible on-site period is ”tbc (to be confirmed).”

During this evaluation, Indian financial regulatory and enforcement agencies are expected to showcase their action taken reports and dossiers for the enforcement, regulatory and investigative work undertaken by them under the anti-money laundering law, criminal tax evasion instance and for strengthening the CFT (combating financing of terrorism) regime.

”The guidelines and rules framed under the Prevention of Money Laundering Act (PMLA), their outcomes and strict adherence to Know Your Customer (KYC) procedures are some of the very important aspects that the FATF experts will be informed about,” the officer quoted in the later part said.

The enactment of the Fugitive Economic Offenders Act in 2018, the anti-black money act of 2015, amendments brought in the PMLA over the years, curbing tax evasion under indirect taxes by bringing in the GST (Goods and Services Tax), new protocols to better regulate suspect transactions in banks and financial intermediaries and the 2016 demonetisation of two large currencies are part of the Indian presentation, an officer had said last year.

The high number of domestic and international attachment of assets and penalties issued under the PMLA, and charge sheets filed by various probe agencies under criminal sections of the law against financial crimes and terror funding will also be part of India’s presentation to the FATF review team.

The wide spectrum of offences from wildlife smuggling to the use of smart electronic tools to generate black money being probed by Indian agencies will be part of the dossier, officials informed.

The new compliance regime brought in by the Financial Intelligence Unit (FIU) for banks, other financial institutions, casinos and payment gateways to report suspicious transactions and counterfeit currency will also be part of the presentation.