- FATF urges India to bolster its regulations for virtual assets amid rising risks of fraud and terrorism.
- Enhanced compliance measures in the metals sector are critical for effective AML efforts.
A joint assessment by regional bodies, including the Financial Action Task Force (FATF), has urged India to enhance its regulation of virtual assets. The FATF’s recent report on India’s efforts to combat money laundering and terrorist financing reveals significant risks associated with domestic illegal activities, primarily fraud, cyber fraud, corruption, and drug trafficking.
While India has made progress in addressing fraud-related money laundering, the report indicates a pressing need to improve responses to human trafficking and to address the backlog of pending cases. Additionally, the report underscores serious threats from terrorism, particularly from groups such as ISIL and Al Qaeda.
Shri Vivek Aggarwal, Additional Secretary in the Ministry of Finance, stated that the FATF places India under “regular follow-up,” which is considered one of the highest rating categories by the organization.
Financial institutions are implementing enhanced measures for politically exposed persons (PEPs), but India must address the technical compliance gap regarding domestic PEP coverage and ensure that reporting entities adhere to these requirements. The non-financial sector and virtual asset service providers are still in the early stages of implementing preventative measures and undergoing proper supervision. Additionally, India should prioritize improving cash restrictions for dealers in precious metals and stones, given the significance of this sector.
India’s Efforts in Combating Money Laundering
India is actively combatting money laundering (AML) through various regulatory measures and frameworks. The Financial Action Task Force (FATF) has highlighted both the progress and challenges India faces in this area. While efforts are underway to enhance regulations for politically exposed persons (PEPs) and improve compliance, gaps remain, particularly concerning domestic PEP coverage.
Additionally, the implementation of preventative measures in the non-financial sector and virtual asset service providers is still in its early stages. Prioritizing cash restrictions for dealers in precious metals and stones is also crucial, given the sector’s material significance in the fight against financial crime.
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