FATF Evaluation:

The reason behind India’s Achievements

• High Level of Compliance: The FATF stated that India reached a high level of technical compliance with its requirements.
• Effective Regimes: India’s AML (anti-money laundering), CFT (countering the financing of terrorism), and CPF (counter-proliferation financing) regimes achieved good results.
• International Cooperation: Notable achievements include international cooperation, access to basic and beneficial ownership information, use of financial intelligence, and depriving criminals of their assets.

Need Improvement

• Non-Financial Sectors: The FATF noted that improvements are needed to strengthen the supervision and implementation of preventive measures in some non-financial sectors.
• Prosecution Delays: India needs to address delays in concluding ML (money laundering) and TF (terrorist financing) prosecutions.
• Non-Profit Sector Risks: Ensure CFT measures prevent the non-profit sector from being abused for TF, including conducting outreach to NPOs on their TF risks.

Mitigation Efforts taken

• Mitigating ML/TF Risks: FATF recognized India’s efforts in mitigating risks from ML/TF, including corruption, fraud, and organized crime.
• Digital Economy Transition: Effective measures have been implemented to transition from a cash-based to a digital economy, reducing ML/TF risks.
• JAM Trinity Implementation: The JAM (Jan Dhan, Aadhaar, Mobile) Trinity, along with stringent cash transaction regulations, has increased financial inclusion and digital transactions, making them more traceable.

Back2Basics: FATF Grey and Black List

FATF maintains two primary lists to identify countries with deficiencies in their anti-money laundering and counter-terrorist financing (AML/CTF) regimes: the Grey List and the Black List.

Grey List (Jurisdictions under Increased Monitoring): 

It includes countries that have strategic deficiencies in their AML/CTF regimes but have committed to resolving these issues swiftly within agreed timeframes. These jurisdictions are subject to increased monitoring by the FATF. Ex. Turkey, Panama etc. (Pakistan and UAE have exited this list.)

Impact:

• Countries on the Grey List are required to work closely with the FATF to address the identified deficiencies.
• Being on the Grey List can lead to economic repercussions such as reduced foreign investment and increased scrutiny from financial institutions and regulators globally.
• The FATF regularly reviews the progress of these countries and updates the list accordingly.

Black List (High-Risk Jurisdictions subject to a Call for Action): 

It includes countries with significant strategic deficiencies in their AML/CTF regimes and have not made sufficient progress in addressing these issues. These jurisdictions are subject to a call for action to protect the international financial system from the risks emanating from these countries.

Impact:

• Countries on the Black List face severe economic and financial consequences. They are subject to enhanced due diligence and, in the most serious cases, counter-measures by FATF member states.
• This listing can result in limited access to the international financial system such as IMF, World Bank; reduced foreign investment, and increased difficulty in conducting international business.

Current Black List Countries:

• North Korea
• Iran
• Myanmar (Burma) (added in February 2023)

PYQ:

[2021] Discuss how emerging technologies and globalisation contribute to money laundering. Elaborate measures to tackle the problem of money laundering both at national and international levels.