A Closer Look
The Financial Action Task Force (FATF), a global watchdog for money laundering and terrorist financing, is set to release its Mutual Evaluation Report on India on September 19, 2023. This report, adopted during the FATF plenary held in Singapore, places India in the "regular follow-up" category, a distinction shared by only four other G20 countries.
This classification signifies India's progress in mitigating risks associated with money laundering and terrorist financing. The report acknowledges India's efforts in combating financial crimes, including those related to corruption, fraud, and organized crime. Additionally, it recognizes India's strides towards transitioning from a cash-based economy to a digital one.
The "regular follow-up" category enhances India's credibility and reputation as a financially stable and secure nation, making it more attractive for investments. This classification also improves access to international markets and lowers borrowing costs. Furthermore, it increases trust in India's trade finance instruments, leading to greater access to international trade.
However, the FATF report also highlights areas where India can further improve. These include strengthening supervision and implementation of preventive measures in non-financial sectors like real estate, and reducing delays in concluding legal proceedings.
The FATF is currently reviewing its standards to ensure they don't hinder financial inclusion, particularly for low-risk accounts. This review aims to simplify customer identification norms for such accounts, promoting financial inclusion without compromising anti-money laundering and counter-terrorist financing efforts.
India's next FATF evaluation is expected to take place in 2031 as part of the fifth round of evaluations. This report will assess India's progress in implementing the FATF recommendations and achieving its goals in combating financial crimes.