India to adopt nuanced approach to deal with at risk NPOs after FATF report

India on Thursday said it will adopt a "nuanced" approach to deal with "at risk" non-profit organisations (NPOs), an issue raised by the global crime watchdog FATF in its report which has otherwise appreciated India for its efforts to tackle terror financing and money laundering.

Additional Secretary (Revenue), Finance Ministry, Vivek Agarwal said India has excelled on 6 'immediate outcomes' of the Financial Action Task Force (FATF), including in risk, policy and coordination, international cooperation, financial intelligence, confiscation and proliferation financing.

On the five other parameters, including abuse of NPOs and terror financing sanctions, as well as prosecution of money laundering and terror financing cases India has got a medium rating.

 

As regards the abuse of NPOs for terror financing, Agarwal said the scope for NPOs being misused is very less in India because there is a cap on cash donations.

"We were trying to make a case that regulatory framework is good enough... Their case is that since the NPO sector is very big, we should have good risk-based metrics... For India, it should be a risk-based regulation and not stifling regulation... We don't see a case for further tightening. We see a case for a more nuanced approach to identify at-risk NPOs," Agarwal said.

He further said that efforts of India are towards having a better outreach with the NPOs to encourage them to maintain their accounts, and donors list so that the chances of getting abused are minimised.

Agarwal said India has suffered the effects of terrorism consistently since Independence and has been taking steps to deal with the menace.

As per the FATF India mutual evaluation report, which has upgraded India to "regular follow up category", theatres of terrorism threats are Islamic State of Iraq and the Levant (ISIL), Al-Qaeda-linked terror groups, radicalisation of individuals, regional insurgencies in North East and Left Wing extremism.

The report said that India has implemented an effective anti-money laundering and combating terror financing system, but major improvements are needed to strengthen prosecution in money-laundering, and terror financing cases.

Agarwal said India recognises the need to streamline the trial process in terror financing and money laundering cases and is taking steps to fast-track it.

Of the recommendations made by FATF, fast-tracking trials in terror financing and money laundering cases is important. Rest of the recommendations are ancillary in nature, Agarwal said.

"We have passed the test with distinction," Agarwal said, adding since India is in regular follow up as per FATF, the country may report risk assessment after three years which is now due for India in 2025.

"But there is no compulsion on us," Agarwal said.

On the possibility of terror financing abuse by not-for-profit organisations (NPO), Agarwal said FATF has said that preventive measures should be taken to check terror financing.

Over 30 lakh NPOs are operating in India, whereas only 2.70 lakh are registered with the income tax department.

The income tax department has used multiple data points to identify "at risk" NPOs and there is ongoing engagement with NPOs to sensitise them so that they are not used as a medium for financing terror, Agarwal said.