FATF to release India’s mutual evaluation report on September 19, places India in regular follow-up category

The Financial Action Task Force or the FATF, the global money laundering and terrorist financing watchdog, is scheduled to release its Mutual Evaluation Report on India on September 19. The report, which was adopted by the FATF plenary held in Singapore between June 26 and 28, places India in the ‘regular follow-up’ category, a distinction shared by only four other G20 countries.

The other countries in the category include the UK, Italy, France, Kazakhstan, Nordic countries and now India by the 40-member organisation.

Sources noted that the classification in the regular follow-up category improves the credibility and reputation of India as a financially stable and secure nation, making it more attractive for investments. “It also increases access to international markets and lowers borrowing costs,” they said, adding that a good rating by the FATF can also lead to increased access to international trade by increasing the trust of India’s trade finance instruments.

The evaluation, which assesses technical compliance to over 40 recommendations and effectiveness over 11 immediate outcomes, had recognised India’s efforts at mitigating the risks arising from money laundering and terrorist financing, including the laundering of proceeds from corruption, fraud, and organised crime as well as measures to move from a cash-based to a digital economy.

Meanwhile, discussions are on amongst member countries of the Financial Action Task Force to review standards and ensure that they do not hinder financial inclusion, especially onboarding of low risk accounts. The objective is to revise the customer identification standards to enable simpler know your customer norms for low risk accounts.

According to senior government sources, several developing countries that are members of the FATF are of the view that standards should not be so difficult that they become an impediment to financial inclusion.
“Financial inclusion is an important aspect of development for developing countries. There is a view that at present there are too many restrictions on account onboarding that may hinder financial inclusion,” said a source familiar with the development, adding that the FATF is looking at the issue through its Policy Development Group.

This is also one of the objectives of the Mexican Presidency of the FATF from July 2024 to June 2026. “Promote the risk-based implementation of the Standards under the principle of proportionality, particularly those that can contribute to advance financial inclusion. This is particularly important as limited access to formal financial services leads to greater reliance on cash and unregulated channels, increasing money laundering and terrorist financing risks,” a previous statement on the priorities of the Mexican Presidency of the FATF had noted.

It had, however, noted that improvements are needed to strengthen the supervision and implementation of preventive measures in some of the non financial sectors such as real estate, and also measures to reduce delays in concluding proceedings.

The mutual evaluation report is based on the fourth round of evaluations being conducted by the FATF at present. India’s next round of evaluation by the FATF is likely to take place sometime in 2031 as part of the fifth round.