India faces money laundering, terror financing risks: IMF

WASHINGTON - As a leader among the emerging economies in Asia with a strongly growing economy and demography, India is facing a range of money laundering and terrorist financing risks, according to a new International Monetary Fund (IMF) report.

“India continues to be a significant target for terrorist groups and has been the victim of numerous attacks,” says the report prepared by IMF’s Financial Action Task Force (FATF) released here Monday.

“The main sources of money laundering in India result from a range of illegal activities committed within and outside the country,” says the report titled “Observance of Standards and Codes FATF Recommendations for Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT)”.

The sources mainly encompass drug trafficking, fraud, counterfeiting of Indian currency, transnational organised crime, human trafficking and corruption.

Money laundering methods are diverse, it says.

In domestic crimes, “the most common money laundering methods are opening multiple bank accounts, intermingling criminal proceeds with assets of a legal origin, purchasing bank cheques against cash, and routing through complex legal structures”.

For transnational organised crimes, methods used to disguise the criminal origin of the funds include the use of offshore corporations and trade based money laundering, the report said.

While acknowledging “India’s serious commitment to combating terrorism in all its forms”, the report made several recommendations including the need to address the technical shortcomings in the criminalisation of both money laundering and terrorist financing and in the domestic framework of confiscation and provisional measures.

Other key recommendations include: clear and specific measures to enhance the current requirements regarding beneficial ownership, improve the reliability of identification documents and the use of pooled accounts and non-face-to-face business.

It should also ensure that India Post, which recently became subject to the PMLA (Prevention of Money Laundering Act), effectively implements the AML/CFT requirements, enhance the effectiveness of the financial sector supervisory regime and ensures that India Post is adequately supervised.

Another recommendation is to ensure that the competent supervisory authorities make changes to their sanctioning regimes to allow for effective, proportionate and dissuasive sanctions for failures to comply with AML/CFT requirements.

(Arun Kumar can be contacted at arun.kumar@ians.in)