India has addressed shortfalls in its black money fight: FATF

In a major boost to measures being taken by India against money laundering and terror financing activities, the Financial Action Task Force (FATF) today said the country has substantially addressed the deficiencies in its regulatory framework and has become largely compliant with global standards in this regard.

FATF is an inter-governmental body that sets standards, and develops and promotes policies to combat money laundering and terrorist financing for countries across the world.

With a substantial improvement in India's regulatory provisions, FATF has also decided to remove the country from its regular follow-up process for determining its compliance to for anti-money laundering and countering financing of terrorism (AML/CFT) regulations.

The move would help India get greater support from international authorities in its fight against black money and check the illicit flow of funds from and to the country.
In its latest report on India, FATF said it has "recognised that India had made significant progress in addressing deficiencies identified in its mutual evaluation report (of June 2010) and decided that the country should be removed from the regular follow-up process".

India was earlier placed in the regular follow-up process for mutual evaluation purposes because of partially compliant (PC) ratings on certain core and key Recommendations.

"Since the publication of the mutual evaluation report (in June 2010), India has been reporting back to the FATF on a regular basis on the progress made in the implementation of its Action Plan to strengthen India’s AML/CFT System.

"India has made significant progress with regard to the implementation of this action plan," FATF said.

Among various improvements in the past three years, India has rectified "nearly all of the technical deficiencies identified with respect to the criminalisation of money laundering and terrorist financing and the implementation of effective confiscation and provisional measures".

Besides, India has substantially addressed the technical deficiencies identified in relation to customer due diligence and other preventive measures, FATF said.

It said India has also further enhanced "its outreach programme to provide guidance to the financial sector on the suspicious transaction reporting obligations and engaging in extensive compliance monitoring, and as brought several of the Designated Non-Financial Businesses and Professions (DNFBPs) within the scope of its preventive AML/CFT measures.

"At its June, 2013 Plenary meeting, the FATF decided that India had reached a satisfactory level of compliance with all of the core and key Recommendations and could be removed from the regular follow-up process," the international body said.
India became a member of FATF in 2010, the same year when it was placed under the regular follow-up process for its compliance to various global standards.

Since then, India submitted seven follow-up reports to FATF regarding the progress
made in its regulatory framework.

In February, while submitting its seventh such report, it also said it would report to the FATF Plenary again in June, 2013 regarding additional steps taken by it to remove the deficiencies to get it removed from the regular follow-up.

FATF said all the financial sector regulators in the country have amended their inspection procedures to give much greater emphasis to AML/CFT in the routine examination programme.

Besides, AML/CFT compliance monitoring has been introduced for the first time for India Post's financial services business and the inspection programme commenced in April, 2011.

"With respect to the suspicious transactions reporting regime, the Financial Intelligence Unit (FIU) has further enhanced its outreach programme to provide guidance to the financial sector on their reporting obligations, and has engaged in extensive compliance monitoring.

"The result has been a significant increase in the number of STRs filed both with respect to money laundering and terror financing, without any evidence that this constitutes defensive reporting.

Approximately two-thirds of the STRs received," it added.

Besides, various designated non-financial businesses and professions (DNFBPs) have been brought within the scope of Prevention of Money Laundering Act (PMLA), such as casinos; real estate agents, sub-registrars in charge of registering property; dealers in precious metals/stones; dealers in high-value goods; and safe deposit keepers.

"No immediate action is currently planned with respect to lawyers and accountants, who the authorities consider to pose a low risk for money laundering on the basis of two risk assessments that have been undertaken.

"However, the amendments to the PMLA contain a provision that will allow additional DNFBPs under the PMLA at a later stage," FATF said.

India also established four inter-agency committees to review the steps needed to respond to the concerns previously raised by FATF -- The AML/CFT Regulatory Framework Assessment Committee, The Casino Sector Assessment Committee (CSAC), The Beneficial Ownership Assessment Committee (BOAC) and The Non Profit Organisations Sector Assessment Committee (NPOC).