India’s money laundering risks originate from illegal activities within the country, the Financial Action Task Force (FATF), a global money laundering and terrorism financing watchdog, said on Thursday.
“These risks relate primarily to fraud, including cyber-enabled fraud, corruption and drug trafficking,” the FATF said in a statement while reviewing the country’s anti-money laundering and counter-terrorist financing measures.
It acknowledged that the South Asian country pursues money laundering related to fraud and forgery in line with predicate crime risks to a large extent, but “less so with some other offences such as human trafficking and drug trafficking.”
According to FATF, the country needed to address the backlog of money laundering cases pending the conclusion of court processes.
It went on to add that India needed to focus on concluding the prosecutions, convict and sanction terrorist financiers as it “faces serious terrorism and terrorist financing threats, including related to ISIL or Al Qaeda.”
Despite implementing measures to tackle illicit finance, the organisation has exhorted the nuclear-armed country to ensure that money laundering and terrorist financing trials are completed and offenders are subject to appropriate sanctions. It added that India should take a risk-based and educative approach with non-profit organisations.
Moreover, the nuclear-armed country has to ensure that measures aimed at preventing the non-profit sector from being abused for terrorist financing are implemented in line with the risk-based approach, including by conducting outreach to non-profit organisations on their terrorist financing risks.
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The international body acknowledged that financial Institutions were taking steps to apply measures to politically exposed persons (PEPs), however, the “issue of lack of coverage of domestic PEPs” from a technical compliance perspective has to be addressed. It also wants India to ensure reporting entities fully implement such requirements.
“Implementation of preventative measures by the non-financial sector and virtual asset service providers, and supervision of those sectors, is at an early stage. India needs to improve implementation of cash restrictions by dealers in precious metals and stones as a priority given the materiality of the sector,” it said.
Following the assessment, FATF has placed India in “regular follow-up” and in line with procedures, will report back to the plenary in three years.
