Gaps in India's money laundering fight addressed: Financial Action Task Force

India's fight against black money got a big thumbs-up on Wednesday, with the global inter-government body Financial Action Task Force (FATF) saying that the country has substantially addressed deficiencies in its regulatory checks against money laundering and terror financing activities.

Paris-based FATF also said that India has significantly stepped up its probes into suspected money laundering and terror funding cases, although a low conviction rate remains a matter of serious concern.

FATF sets global standards for Anti Money Laundering and Countering Financing of Terrorism (AML/CFT) regulations for governments across the world, while India has been its member since 2010.

With a substantial improvement in India's regulatory provisions, FATF also decided to remove the country from its regular follow-up process for determining its compliance to the global AML/CFT standards. India was put under this follow- up process in June 2010, when several gaps were noticed in its regulatory regime.

The move would help India get greater support from international authorities in its fight against black money and check the illicit flow of funds from and to the country.

In its 46-page status report on progress made by India on improving its AML/CFT regulatory regime, FATF lauded the efforts made by regulators such as RBI, Sebi and IRDA, as also the Finance Ministry, to ring-fence various financial activities from the money laundering and terror funding risks.

It, however, observed that further efforts might be required for regulating casinos and non-profit organisations.

With regard to financial services offered through a vast network of post offices, FATF said that necessary checks have been now put in place to avert any money laundering risks.

The FATF said that India's compliance with global standards for AML/CFT regulations have reached a satisfactory level, but there remains an "effectiveness issue in the process that leads from accusation to conviction" in the cases of suspected money laundering and terror funding activities.

The number of money laundering investigations in India has increased from 798 at the end of 2009 to 1,561 by April 2013.

Besides, the number of persons accused of terror financing and the number of cases under probe has also increased and stood at 470 and 143 respectively between 2006 and March 2013.

"India is taking various actions with the aim to effectively implement the Prevention of Money Laundering Act. As a result, an increase in money laundering investigations and prosecution complaints can be observed. However, the absence of any money laundering conviction remains a serious effectiveness issue," FATF said.

With regard to the terror financing cases, FATF said that the number of persons convicted has remained low, namely five in total between 2006 and March 2013, while there have been no new convictions since April 2011.

"In addition, there were no cases under trial in 2012, These figures reflect an effectiveness issue in the process that leads from accusation to conviction in India," FATF said.

"Even though some improvement regarding effectiveness since the 2010 Mutual Evaluation Report (of regulatory checks in India) can be observed, the deficiency regarding effectiveness remains," FATF said.

With respect to the suspicious transactions reporting regime, the Financial Intelligence Unit has also enhanced its outreach programme to provide guidance to the financial sector on their reporting obligations, and has engaged in extensive compliance monitoring.