India put in the regular follow-up category by FATF

India has been put in the 'regular follow-up category' by the global anti-money laundering body, the Financial Action Task Force (FATF). This decision was taken at the plenary meeting of the FATF held in Singapore from 26-28 June 2024. The meeting discussed issues relating to money laundering, terrorism financing, and proliferation financing.

It also reviewed the performance of 17 countries on their compliance and action on the FATF mandated actions on anti-money laundering issues, anti-terrorism financing, and anti-proliferation financing. 

India among five countries to be kept in regular follow-up category

During the Singapore meeting, the FATF reviewed India’s performance in implementing the provisions regarding anti-money laundering, anti-terrorism financing and anti-proliferation financing. 

India, along with Russia, France, Italy, and the United Kingdom, was kept in the ‘regular follow-up' category. One country was put on the grey list, and the remaining countries were kept in the' enhanced follow-up' category.

The FATF appreciated India’s effort in combating anti-money laundering and anti-terrorist financing but said that India needs to take measures to tackle delays in concluding prosecution in cases of money laundering and terror financing.

Evaluation of India By FATF

India joined the FATF in 2010, and the first evaluation of India by the FATF took place in 2010.

The next evaluation of India was postponed due to a coronavirus pandemic and was conducted in 2023. The Singapore meeting discussed the 2023 evaluation report of India.

India now has to submit a report to the FATF by October 2027 the measure it has taken to address the concerns expressed by the FATF.

The final report of the FATF will be issued following a quality and consistency review.

The FATF was assisted by the Department of Revenue and the Union Ministry of Finance in the FATF evaluation.

Implication for India

India will likely benefit in several ways by being put up in the regular follow-up category.

First, it will increase the ease of financial transactions between India and the rest of the world, 

It will become easier for India and Indian companies to raise money from the international market at a cheaper rate.

It will also help attract foreign investment in the country, as foreign investors' confidence in India's legal system will grow.

It will increase foreign confidence in the Indian payment system which will help in the expansion of the UPI(Unified Payment Interface).

About  Financial Action Task Force (FATF)

The Group of Seven (G-7) countries set up the FATF at the Paris summit meeting in 1989.

Function of FATF

It is an inter-governmental body;

• which sets the global standards on anti-money laundering(AML), combating the financing of terrorism(CFT) and proliferation financing (providing funds or financial services for the development of weapons of mass destruction, i.e. chemical, biological or nuclear weapons),
• It issues recommendations to countries.
• It assesses whether countries are taking effective action against money laundering and anti-terrorist financing. 
• It works closely with other organisations, including the International Monetary Fund (IMF), the World Bank, the United Nations, and FATF-style regional bodies (FSRBs).

Members of FATF 

At present, 39 countries are members of FATF. However, Russia has been suspended since 2023. India joined the FATF in 2010.

Headquarters: Paris, France.

President of FATF: T Raja Kumar of Singapore.

Prevention of Money Laundering Act (PMLA) 2002, based on the recommendation of the Financial Action Task Force (FATF), is the main law dealing with money laundering in India. It was implemented on 1 July 2005.  The provision of the PMLA is enforced by the Directorate of Enforcement or ED.