India’s exemplary performance in the 2024 Financial Action Task Force (FATF) Mutual Evaluation Report (MER) underscores the nation’s robust and multifaceted approach to addressing the critical issues of money laundering (ML) and terrorist financing (TF). As one of the few countries to be placed in the “regular follow-up” category (which is the best outcome possible), India’s achievement highlights its strong commitment to financial integrity.
Authorities in India have a strong understanding of ML/TF risks, as documented in the 2022 National Risk Assessment (NRA), and various sectoral and thematic risk assessments conducted from time to time. These assessments are crucial in identifying new and emerging threats and vulnerabilities. For example, the risk arising from a cash-based economy has led to enhanced focus on developing the infrastructure for seamless digital transactions. The government’s policies have been aimed at promoting digital transactions and reducing reliance on cash, which are more difficult to trace and more vulnerable to being used for ML/TF purposes. The Jan Dhan, Aadhaar and Mobile (JAM) trinity is as much about mitigating ML/TF risks as it is about financial inclusion.
The threat assessment revealed that major ML threats in the banking sector stem from loan frauds and cyber frauds. The MER acknowledges the effectiveness of many measures taken by India to address these, such as: widespread access to Central Fraud Registry (CFR) to stakeholders; establishment of the Indian Cybercrime Coordination Centre (I4C) in 2020; establishment of a semi-automated helpline for cybercrime victims in 2021, which has helped in recovery of monies stolen in cyber frauds; and establishment of a FinTech Department within RBI in 2022 to foster innovative initiatives and to facilitate live testing of products or services in a controlled environment.
Whole-of-govt approach
In today’s volatile, uncertain, complex, and ambiguous (VUCA) global environment, it is important to embrace a strategic, adaptable, and forward-looking approach to identifying and addressing risks. A key strength of the Indian system is its use of a whole-of-government approach to addressing emerging risks. There is continuous domestic coordination and co-operation on Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) issues at both the policy and operational levels at the central and state levels.
The Inter-Ministerial Coordination Committee (IMCC), headed by the Revenue Secretary, and the Joint Working Group (JWG), headed by the Additional Secretary (Revenue), are the key bodies ensuring that all relevant ministries, departments, and law enforcement agencies work in a coordinated manner to tackle ML/TF threats effectively.
Overall supervision and monitoring is conducted at the apex level by the Economic Intelligence Council (EIC) chaired by the Finance Minister. As noted in India’s MER, the goals and objectives of law enforcement agencies both at the Central and State level are in line with the ML/TF risks identified in the NRA.
Greater coordination and information sharing has also been possible due to greater digitalisation, such as through NCRB’s CCTNS, NATGRID, and FIU-India’s FINNET 2.0 portal.
The MER also acknowledges public-private partnership in developing a nuanced understanding of risks and in policymaking.
One of the key findings of FATF is that there ‘is a good general understanding of risks and obligations as well as application of mitigating measures in the financial sector.’ Hence, what we see evolving in India is a whole-of-society approach to financial integrity, fighting financial crimes, and policymaking.
Pandey is Secretary (Finance Commission), and Swain is Director in the Department of Revenue. They were part of the Central Coordinating Team for India’s Mutual Evaluation. Views are personal
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