India Achieves an ‘Outstanding Outcome’ in FATF Mutual Evaluation

Key Highlights

1. Outstanding Outcome:
   • India has received an outstanding outcome in the FATF Mutual Evaluation for 2023-24, demonstrating a high level of compliance in combating Money Laundering (ML) and Terror Financing (TF).
2. Regular Follow-Up Category:
   • India has been placed in the “regular follow-up” category by the FATF. This distinction is shared by only four other G-20 countries, highlighting India’s significant progress and adherence to FATF standards.
3. Evaluation Report Insights:
   • The Mutual Evaluation Report, adopted during the FATF plenary in Singapore, underscores India’s success in mitigating ML/TF risks through initiatives like the JAM Trinity (Jan Dhan, Aadhaar, Mobile) and stringent regulations on cash transactions.
   • The FATF noted that while India has made significant strides, some non-financial sectors still need improvement in supervision and preventive measures.
4. Impact on Financial Stability:
   • The positive evaluation enhances India’s financial stability and integrity. It boosts access to global financial markets, increases investor confidence, and supports the expansion of initiatives like the Unified Payments Interface (UPI).

Financial Action Task Force (FATF) Overview

• Foundation and Mandate:
  • Established in 1989 by G7 countries, the FATF initially focused on developing policies to combat money laundering.
  • In 2001, its mandate expanded to include counter-terrorism financing (TF) and has since begun addressing issues related to virtual currencies.
• Function:
  • The FATF is a policy-making body aimed at generating political will to enforce legislative and regulatory reforms in money laundering and TF.
  • It monitors the implementation of its recommendations through peer reviews, known as “mutual evaluations.”
• Headquarters:
  • The FATF Secretariat is located in Paris.
• Membership:
  • The FATF comprises 39 members, including two regional organizations: the Gulf Cooperation Council and the European Commission.
  • India became an Observer in 2006 and a full member in 2010.

FATF’s Mutual Evaluation Process

1. Evaluation Team:
   • A team of experts from FATF member countries conducts the evaluation, assessing the country’s measures and their effectiveness in preventing ML and TF according to international standards.
2. Country Reports:
   • Findings are compiled into a Mutual Evaluation Report, which includes detailed analysis, compliance ratings, and recommendations for improvement.
3. Follow-Up:
   • Countries may be placed in follow-up processes to address any identified deficiencies. This involves periodic reporting to the FATF on progress in implementing recommended improvements.
4. Public Disclosure:
   • The Mutual Evaluation Report is published to ensure transparency and encourage countries to enhance their AML/CFT regimes.

Significance for India

• Enhanced Financial Stability:
  • India’s successful evaluation supports its financial stability and credibility on the global stage.
• Investor Confidence:
  • The positive outcome boosts investor confidence and facilitates access to international financial markets.
• Support for Digital Initiatives:
  • The evaluation supports ongoing digital initiatives, such as the UPI, reinforcing India’s commitment to secure and efficient financial systems.

India's achievement in the FATF Mutual Evaluation reflects its robust anti-money laundering and counter-terrorism financing frameworks, while also highlighting areas for further improvement. The outcome not only enhances India's global financial standing but also aligns with its broader economic and strategic goals.