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India’s FATF review of anti-money laundering regime postponed to 2021

FATF review of India's anti-money laundering and terror financing regime has been postponed to 2021 due to the COVID-19 outbreak. 

Jul 27, 2020 13:28 IST
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India’s much-awaited Financial Action Task Force (FATF) review has been postponed to 2021. The review was scheduled for this year as a part of the regular review cycle after 10 years. 

The FATF review would comprise an evaluation of India's anti-money laundering and terrorist financing regime and the legal measures taken to keep a check on financial crimes. The review has been postponed till early next year due to COVID-19 pandemic. 

Rahul Navin, a 1993-batch IRS officer, has been deployed by the centre to work as an officer on special duty (OSD) with the Enforcement Directorate (ED) to take the processes forward. The ED is the nodal agency that is responsible for undertaking investigations under the Prevention of Money Laundering Act (PMLA) in the country.

What is the Financial Action Task Force (FATF)?

The Financial Action Task Force is an intergovernmental organisation, which was set up in 1989 to combat money laundering. The global watchdog’s mandate was extended to include terror financing in 2001. 

Key Highlights 

•  The task force conducts a regular peer review of each member nation to assess the levels of implementation of the FATF recommendations and provides in-depth description and analysis of each country's financial system to prevent criminal abuse.

•  The review of India's anti-money laundering and terrorist financing regime was scheduled for 2020 as a part of the regular review cycle after 10 years. The last review was conducted in June 2010.

•  The FATF had observed in 2013 that India had made significant progress in addressing deficiencies identified in its mutual evaluation report. Hence, the watchdog decided that the nation should be removed from the regular follow-up process.

•  India’s on-site review, to be conducted by experts of the global body, was scheduled to begin in September-October 2020. The FATF Secretariat, however, informed that the review is being tentatively pushed to January-February 2021. 

•  India has established a joint working group (JWG) comprising 22 agencies including intelligence gathering, central investigation and regulatory agencies to make presentations and brief the FATF experts. The grouping will be supervised by the Department of Revenue under the finance ministry.

•  Some of the agencies in the grouping include the CBI, ED, IT Department, Directorate of Revenue Intelligence, market regulator SEBI, bank regulator RBI, insurance regulator IRDAI, Customs and Financial Intelligence Unit (FIU).

FATF’s statement 

The FATF announced the postponement of all remaining FATF mutual evaluations and follow-up deadlines through a public declaration. The international watchdog stated that the gravity of the global COVID-19 situation and subsequent measures adopted by different countries to combat the pandemic including confinement and travel restrictions are making it impossible for assessed jurisdictions and assessors to conduct on-site visits and hold in-person meetings. 

The FATF stated that the situation has significantly impacted the countries' ability to actively participate in the mutual evaluation and related follow-up processes. Therefore, the FATF Plenary decided to temporarily postpone all its remaining mutual evaluations and deadlines. As per reports, the new dates will be for early next yeat. 

Background

India has prepared multiple dossiers of the actions undertaken by it under the anti-money laundering law and several criminal tax evasion probes. Some of the actions undertaken by the Indian government include the anti-black money Act of 2015, implementation of GST in 2017, enactment of the Fugitive Economic Offenders Act in 2018, Demonetisation of two big currency notes in 2016 and amendments brought in the PMLA over the years. 

The FATF review takes almost a year to finish if all the timelines are met. The Financial Action Task Force is scheduled to discuss the Indian legal system against financial crimes at its Plenary meeting in February 2022. It will also subsequently issue a statement and recommendations about the country.

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