FATF praises NIA and ED's ability to conduct complex financial investigations, identify money trails

Paris: The global Financial Action Task Force (FATF) on Thursday praised the Indian authorities for having demonstrated a "good understanding" of both current and emerging Terror Financing (TF) threats and risks in different theatres of risk in the country, conducting investigations in line with the risks identified.

"Case studies provided reflect India's ability, in particular the National Investigative Agency (NIA) and ED, to conduct complex financial investigation and identify money trails to support the investigation and prosecution of terrorist activity and TF," the independent inter-governmental body said on Thursday while releasing its Mutual Evaluation Report.

The FATF develops and promotes policies to protect the global financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. The FATF recommendations are recognised as the global Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) standard.

The Mutual Evaluation Report gave a thumbs-up to India for achieving a "high-level of technical compliance" across its recommendations and taking "significant steps" to implement measures to tackle illicit finance.

"A joint FATF-APG-EAG assessment of the country's measures to tackle illicit finance concludes that India has implemented an Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) framework that is achieving good results, including on risk understanding, access to beneficial ownership information and depriving criminals of their assets. Authorities make good use of financial intelligence and co-operate effectively, both domestically and internationally," it stated.

The report summarises the AML/CFT measures in place in India and analyses the level of compliance with the 40 FATF recommendations and the level of effectiveness of India's AML/CFT system. It also provides recommendations on how the system could be strengthened.

The FATF admitted that India faces serious terrorism and terrorist financing threats, "including related to ISIL or Al Qaeda" acknowledging that terrorist financing risks are generally closely linked with terrorism risks, with flows of funds or provision of other assets constrained to within India or surrounding countries.

"India faces a disparate range of terrorism threats, categorised into six different theatres. These can be summarised as theatres associated with ISIL or AQ linked extremist groups active in and around Jammu and Kashmir, whether directly or via proxies or affiliates, as well as other separatist movements in the region; other ISIL and AQ cells, their affiliates, or radicalised individuals in India; regional insurgencies in the Northeast and North of India; and left-wing extremist groups seeking to overthrow the government," the report detailed.

The most significant terrorism threats, it mentioned, appears to relate to ISIL or AQ linked groups active in and around Jammu and Kashmir.

At the same time, the FATF mentioned that India has taken significant steps in financial inclusion by more than doubling the proportion of the population with bank accounts, encouraging greater reliance on digital payment systems, and making use of simplified due diligence for small accounts.

The report mentioned that it is critical that India continues to improve its system as its economy and financial system continue to grow, in particular ensuring that money laundering and terrorist financing trials are completed and offenders are subject to appropriate sanctions.

"India's main money laundering risks originate from illegal activities within the country, these risks relate primarily to fraud, including cyber-enabled fraud, corruption and drug trafficking. India 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. The country needs to address the backlog of money laundering cases pending conclusion of court processes," the report stated.