Monday Morning Meeting on India’s Evaluation by the FATF: Results and Implications

Col. Vivek Chadha (Retd.), Senior Fellow, Manohar Parrikar Institute for Defence Studies and Analyses (MP-IDSA), New Delhi spoke on “India’s Evaluation by the FATF: Results and Implications” at the Monday Morning Meeting held on 30 September 2024. The session was moderated by Dr. Ashok K. Behuria, Senior Fellow, MP-IDSA. Amb. Sujan R. Chinoy, Director General MP-IDSA and scholars attended the meeting.

Executive Summary

The Financial Action Task Force (FATF) is an international body combating money laundering and terror financing. Its mandate has evolved over time, and there is a need for better regulation of new technologies, public information dissemination, and private sector involvement. FATF’s mutual evaluation reports have influenced amendments in India's anti-money laundering and counter-terror measures.India has made strides in strengthening its Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) framework but faces vulnerabilities.Some key themes under consideration include the exploitation of gaming platforms for cyber fraud, the relationship between global economic structures and FATF reports, and the role of cryptocurrencies in terror financing and money laundering activities.

Detailed Report

The session began with the moderator, Dr. Ashok. K. Behuria’s opening remarks, who commented on the historical context and the purpose behind creating the Financial Action Task Force (FATF) as an international watchdog to monitor and assess threats and set global standards regarding issues such as money laundering and terror financing. He emphasised that FATF was primarily set up to reduce the vulnerabilities of the international system, which faces the risk of being exploited by terrorists and criminal networks.
Col. Chadha began his presentation by explaining the necessity behind the creation of FATF and highlighted how its mandate has evolved since 1989. He pointed out that it initially began looking into terror financing in the immediate aftermath of the 9/11 attacks and more formally in 2003, marking a shift from its narrow focus on money laundering. Later, the organisation weaved counter-terror measures into its anti-money laundering guidelines and examined how to enforce them effectively.
Col. Chadha also distinguished between terror financing and money laundering and highlighted how terror-related activities are often financed through legitimate avenues. He also underscored FATF’s mandate, organisational structure, the scope of its activities, and the impact of countries like Pakistan being placed on the grey list. He also explored how the organisation conducts mutual evaluations, their relevance, the process of publication of such reports, the review process following their publication, the reasons behind some countries being placed on grey and black lists, and how India’s counter-terror measures and anti-money laundering legislations have been amended based on past mutual evaluation reports.
He also shed light on the findings of the mutual evaluation report released in 2024 about India’s efforts to counter money laundering and terror financing and provided insights on its achievements and the vulnerabilities it continues to face. In addition, he drew comparisons between India, the United States, Australia, Japan, Singapore, China, South Africa, Brazil, Türkiye, and Pakistan in terms of their effectiveness in curbing terror financing and money laundering.
At the same time, he also underlined the main conclusions that could be derived from the risk assessment conducted by India before FATF’s mutual evaluation, and the findings of India’s National Strategy for AML/CFT, and the critical regional threats faced by the country. He emphasised that the challenge to India posed by illicit financial flows can be primarily attributed to cross-border threats from the Western front.
Additionally, he assessed the successes and limitations of India’s Anti-Money Laundering and Countering the Financing of Terrorism strategies, its successes since 2010, and how they have not been effectively implemented due to the slow pace of persecution of those indicted on such charges. He also spoke about how virtual currencies can be exploited by terrorists.
Finally, he emphasised the need for regulating new-age technologies, disseminating relevant information in the public domain, and involving the private sector in addressing the challenges related to terror financing and money laundering.

Q/A Session

The Q/A Session broadly delved into themes such as the exploitative use of gaming platforms to carry out cyber fraud, the linkage between a dollar-driven or a G-7-driven economic order and the mutual evaluation reports, and the potential impact of de-dollarisation efforts on future evaluation reports released by FATF. Furthermore, issues such as the role of bitcoin in terror financing and money laundering-related activities, the link between tax evasion and money laundering, reasons behind the international legitimacy granted to FATF reports, India’s involvement in Pakistan being placed on the grey list in 2018, the scope of FATF’s involvement in reviewing non-state actors’ financial dealings, and use of hawala networks to transfer money by expatriates were also discussed.
Col. Chadha provided insightful responses to the questions and comments raised.
This report was prepared by Ms. Saman Ayesha Kidwai, Research Analyst, Counter-Terrorism Centre, MP-IDSA.