India might be able to secure full membership of the Financial Action Task Force (FATF), an inter-governmental body formed to tackle money laundering and terrorist financing, only by next year.
This is because the country, a participating observer since February 2007, has to undergo a successful mutual evaluation with the international body in order to obtain a full member status, which will take place by the year-end.
FATF review is done after every four years and India had an FATF review in 2005.
India is a member of APG (the Asia Pacific Group on Money Laundering), which is an associate member of FATF.
According to a finance ministry official, India and APG will do a mutual evaluation by this year-end. “We are sure to get the FATF membership when the next evaluation is done in December,” he said.
Getting the membership of FATF will enable India to get international cooperation easily in money laundering cases. Also Indian banks would not have to face regulatory hurdles while trying to set up overseas branches.
According to industry officials, the Indian government has shown political commitment to implement the FATF 40+9 recommendations and become a member of the global body.
Enacting the amended Prevention of Money Laundering Act (PMLA), which was passed by parliament recently to make the anti-money laundering regime more effective, was the final step for India to move towards getting the coveted membership of FATF next year.
Certain compliances for becoming an FATF member were among the amendments in PMLA. The compliances included suspected cases of terror financing that would be part of the suspicious transaction reporting system, setting up of a Financial Intelligence Unit (FIU) and making Know Your Customer (KYC) norms legally binding. There is a certain level of preparedness required to become an FATF member, which involves having an anti-money laundering legislation and implementation of the same, said Neeta Potnis, Partner with Deloitte Haskins and Sells who heads the Deloitte Financial Advisory Services’ anti-fraud and forensic practice in India.
Getting an FATF membership would help India get easy access to international co-operation in money laundering cases and would change perception of India abroad, said Arpinder Singh, executive director, forensic services, KPMG.
Money laundering is a global menace and as India becomes prominent global business destination, FATF membership gains all the more importance, said Singh and added that it would also open the doors for Indian banks to expand globally. FATF, which was created in 1989 to generate the necessary political will to bring about legislative and regulatory reforms, has 34 members, including the US, the UK, Japan, Germany and China.
