Financial Crime World

India’s Anti-Money Laundering and Combating Financing of Terrorism (AML/CFT) Regulations by Country: A Comprehensive Review

India’s AML/CFT regime is still in its early stages, with the Prevention of Money Laundering Act, 2002, coming into force in 2005 and undergoing amendments in 2009. The Unlawful Activities (Prevention) Act, 1967, was also amended in 2004 to criminalize terrorist financing, and again in December 2008 to broaden its scope.

Challenges Faced by India

Despite being a significant target for terrorist groups, India has no published figures on the number of terrorist cells operating within the country. Since mid-2009, the government has increased its focus on money laundering and the use of ML provisions, but there are still several legal issues that need to be resolved.

Law Enforcement Efforts

India’s commitment to combating terrorism is evident in its law enforcement efforts, with a strong pursuit of the financial aspects of terrorism. However, this effort has yet to translate into convictions and firm case law. The country has also expanded and strengthened its preventive measures for the financial sector, but more needs to be done to bring these measures in line with the FATF standards.

Key Concerns

  • Lack of regulation and supervision over designated non-financial businesses and professions, except for casinos operating in Goa.
  • Technical shortcomings in the criminalization of money laundering and terrorist financing.
  • Limited CDD obligations.
  • Inadequate identification documents and business practices.
  • Ineffective STR reporting and financial sector supervision.

Recommendations

To address these concerns, key recommendations have been made to India, including:

  • Addressing technical shortcomings in the criminalization of money laundering and terrorist financing.
  • Broadening CDD obligations.
  • Improving identification documents and business practices.
  • Enhancing the effectiveness of STR reporting and financial sector supervision.

Methodology

The mutual evaluation was conducted using the FATF Recommendations published in October 2004 and the 2004 Methodology for Assessing Compliance with the FATF 40 Recommendations and FATF 9 Special Recommendations.