India To Join FATF’s Elite Circle for Excellence in Financial Crime Prevention

India is set to join the Financial Action Task Force’s (FATF) exclusive club of top performers on September 19, surpassing major economies such as the US, China, Germany, Japan, and Canada. This achievement reflects India’s exceptional standards in combating money laundering and terrorism financing. The announcement highlights India’s global leadership in promoting transparency in online transactions and credit card payments.

India’s High Standards Recognized

According to officials, India’s comprehensive performance report on financial crime prevention has earned a commendation for meeting 37 of the 40 stringent evaluation criteria established by the FATF. This accomplishment positions India alongside only three other G20 members—the United Kingdom, France, and Italy—who have achieved similar high standards.

India’s outstanding performance in FATF’s mutual evaluation for the period 2023-24 has placed the country in the top category of “regular follow-up.” This designation allows India to address the remaining three parameters on a voluntary basis. In contrast, countries in the “enhanced follow-up” category, such as the US, China, and Germany, are required to address all shortcomings mandatorily and report progress annually.

Implications of the “Regular Follow-Up” Status

Being in the “regular follow-up” category offers significant advantages for India. Countries in this category are required to report back only once every three years, and this process is voluntary. This status enhances India’s credibility and reputation as a secure financial environment, making it a more attractive destination for international investments.

The benefits include improved international cooperation in areas like countering terrorist financing and asset recovery, increased access to global markets, lower borrowing costs, and enhanced trust in India’s trade finance instruments. These factors collectively contribute to a more favorable investment climate.

FATF’s Assessment and Areas for Improvement

The FATF has acknowledged India’s “high level of technical compliance” with its standards, commending India’s efforts in understanding money laundering and terrorism financing risks, international cooperation, and access to ownership information. The FATF also praised India for its use of financial intelligence and measures to counter-proliferation financing.

However, the FATF report noted areas needing improvement. Specifically, the FATF recommended strengthening supervision and implementation of preventive measures in some non-financial sectors. Additionally, India needs to address delays in concluding money laundering and terrorism financing prosecutions.

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India’s Role in Enhancing Global Financial Transparency

Looking ahead, the FATF’s next major focus is on setting standards for the transparent and efficient disclosure of parties involved in online transactions, including through payment aggregators and credit/debit cards. India is playing a pivotal role in this initiative, balancing regulatory requirements with the need for transaction efficiency.

Officials indicated that intensive stakeholder consultations and industry outreach will precede the finalization of these standards. The Reserve Bank of India (RBI) supports enhanced mandatory disclosures and information exchange with FATF member countries. Industry stakeholders, including Visa and MasterCard, are actively involved in these discussions.

The FATF, established in 1989, serves as the premier body for setting standards to combat financial crimes. With 38 member countries and two regional bodies, the FATF enforces compliance through a rigorous “mutual evaluation” process.