India joined the UK, France, Italy and other G20 group of countries which have been accorded ‘regular follow-up’ category by Financial Action Task Force (FATF), Finance Ministry said on Friday. This was announced after the forum adopted ‘Mutual Evaluation Report’ of India.

“India’s performance on the FATF Mutual Evaluation accrues significant advantages to our growing economy, as it demonstrates the overall stability and integrity of the financial system,” the Ministry said. Further, good ratings will lead to better access to global financial markets and institutions and increase investor confidence. It will also help in the global expansion of the Unified Payments Interface (UPI), India’s fast payment system

What’s ‘regular follow up’?

FATF places member countries in any of the four categories namely, ‘regular follow-up’, ‘enhanced follow-up’, ‘grey list’ and ‘black list’, regular follow up being the top most category amongst 4. Only 5 countries in G20 including India have been placed in regular follow up after Mutual evaluation report.

Amongst 177 countries covered by FATF and its Regional Bodies (FSRBs), only 24 countries includes India are in regular follow-up. Even developed countries like US, Australia, Canada, New Zealand, Singapore, European nations such as Germany, Finland, Denmark etc are in enhanced follow-up ‘Enhanced follow-up’ is given to countries with significant deficiencies.

There are 40 recommendations and 11 immediate outcomes. One needs to get higher rating in atleast 33 recommendations and 5 immediate outcomes to be placed in regular follow-up. The evaluation and rating are very stringent and hence getting placed in regular follow up is a tall order ask. FATF is an inter-governmental organisation established in 1989 as the international watchdog to combat money laundering, terrorist financing, and other related threats to the integrity of the international financial system. India became a member of FATF in 2010.

Placing in ‘regular follow-up’ category “marks a significant milestone in the nation’s efforts to combat money laundering (ML) and terrorist financing (TF),” the Ministry said in a statement.  Among other things, FATF has recognised the efforts made by India on mitigating the risks arising from ML/TF, including the laundering of proceeds from corruption, fraud, and organised crime and effective measures implemented by India to transition from a cash-based to a digital economy to reduce ML/TF risks.

“Implementation of the JAM (Jan Dhan, Aadhaar, Mobile) Trinity, along with stringent regulations on cash transactions, has led to a significant increase in financial inclusion and digital transactions; these measures have made transactions more traceable, thereby mitigating ML/TF risks and enhancing financial inclusion,” the statement said.

The Ministry highlighted that since 2014, the Government has enacted a series of legislative changes and bolstered enforcement efforts to tackle ML, TF, and black money. This multi-pronged strategy has brought these measures in line with international standards and has demonstrably proven to be effective, yielding positive results. I

The Ministry termed FATF’s recognition as a testament to the rigorous and effective measures implemented by India over the last 10 years to safeguard its financial system from ML/TF threats. It underscores the country’s commitment to international standards and its proactive stance in the global fight against financial crimes. “India’s excellent rating will enhance the capacity of our country to lead the global effort on countering cross border terror financing and money laundering,” the Ministry said.

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