Fight against financial crimes in India

Money laundering and terrorist financing

Money laundering (ML) and the financing of terrorism (TF) are major concerns for the international community. They pose major risks to the global economy and financial system and to the security of citizens.
Money laundering occurs when criminals disguise their wealth and assets’ illegal origins to avoid suspicion from law enforcement agencies and prevent incriminating evidence.
Terrorist financing funds terrorist activity. While terrorists are not greatly concerned with disguising their money’s origin, they take steps to conceal its destination and purpose. Therefore, the money may come from legitimate sources, but terrorists and terrorist groups can also finance illegal activities.
While money laundering and terrorism financing activities differ in many ways, they often exploit the same vulnerabilities in financial systems and the broader economy that allow for an inappropriate level of anonymity and opacity in the execution of financial transactions.
Preventing and detecting money laundering can effectively assist with identifying criminals and terrorists and how they obtained their funds. Anti-money laundering and combating the financing of terrorism (AML/CFT) policies and measures are designed to prevent and combat these crimes and are essential to protect the integrity and stability of financial markets.

2025 UIA event in New Delhi and India’s economy

Topics in current discussions on the fight against money laundering and terrorist financing will be object of the UIA seminar “India: The New Global Manufacturing Hub” (New Delhi, India, from March 29 to March 30, 2025), in which the UIA Banking and Financial Services Law Commission is involved.
India is the largest country in the world by population and has the largest diaspora. It is a lower-middle income country with one of the world’s fastest growing economies that is currently the world’s fifth largest economy.
The Indian economy continues to grow at a healthy pace despite challenging global conditions, according to World Bank’s latest “India Development Update: India’s Trade Opportunities in a Changing Global Context” (September 2024). On the demand side, growth was primarily driven by a significant expansion of investment, in particular public infrastructure investment and private investment in real estate. On the supply side, it was supported by a rebound in the manufacturing sector, benefitting from a buoyant construction sector and low input costs.

India’s measures to combat money laundering and terrorist financing

During the FATF Plenary that took place on 26-28 June 2024 in Singapore, the Financial Action Task Force (FATF) - the global money laundering and terrorist financing watchdog that sets worldwide Standards that aim to prevent these illegal activities and the harm they cause to society - discussed and adopted the joint FATF/APG/EAG Mutual Evaluation Report of India (later released) which assessed the effectiveness of India’s measures to combat money laundering, terrorist financing and proliferation financing (providing funds or financial services for nuclear, chemical, or biological weapons) and their compliance with the FATF 40 Recommendations (also often referred to as the FATF Standards), that provide a comprehensive framework of measures to help countries tackle illicit financial flows.
The Mutual Evaluation Report is an assessment of a country’s measures to combat money laundering and the financing of terrorism (and also proliferation of weapons of mass destruction).
The Plenary concluded that India has reached a high level of technical compliance with the FATF requirements and its AML/CFT/counter-proliferation financing (CPF) regime is achieving good results, including in its money laundering and terrorist financing risk understanding, international cooperation, access to basic and beneficial ownership information, use of financial intelligence, and depriving criminals of their assets and counter-proliferation financing measures. However, improvements are needed to strengthen the supervision and implementation of preventive measures in some of the non-financial sectors. India also needs to address delays relating to concluding money laundering and terrorist financing prosecutions, and to ensure that CFT measures aimed at preventing the non-profit sector from being abused for terrorist financing are implemented in line with the risk-based approach, including by conducting outreach to non-profit organisations (NPOs) on their terrorist financing risks.
On 19 September 2024, the FATF published the mentioned Mutual Evaluation Report that summarises the AML/CFT measures in place in India as at the date of the onsite visit from 6 to 24 November 2023. This Report, in addition to the Plenary conclusions above, establishes the following:
• India’s main money laundering risks originate from illegal activities within the country, these risks relate primarily to fraud, including cyber-enabled fraud, corruption and drug trafficking.
• India faces serious terrorism and terrorist financing threats, including related to ISIL or Al Qaeda. India as a strong emphasis on disruption and prevention and has demonstrated its ability to conduct complex financial investigations.
• India has made significant steps in financial inclusion, more than doubling the proportion of the population with bank accounts, encouraging greater reliance on digital payment systems, and making use of simplified due diligence for small accounts. These efforts have supported financial transparency, which in turn contribute to AML/CFT efforts.
• There is a good understanding of risk and application of preventative measures in the financial sector, especially by commercial banks. Financial institutions are the first line of defense against the financial criminal behaviours.
Following the assessment, India is placed in “regular follow-up” and in line with procedures, will report back to the FATF Plenary in three years.

Final remarks

Money laundering and terrorist financing are universal problems. For developed and developing countries alike, these activities compromise the stability, transparency and efficiency of financial systems. As specified by the International Monetary Fund, money laundering and terrorist financing can make countries less stable, which in turn, can weaken law and order, governance, regulatory effectiveness, foreign investments, and international capital flows. Money laundering and terrorism financing activity in one country can have serious adverse effects across borders and even globally. Countries with weak or ineffective controls are especially attractive for money launderers and financiers of terrorism. These criminals seek to conceal their criminal activities by exploiting the complexity of the global financial system, the differences between national laws, and the speed at which money can cross borders. The fight against money laundering and terrorist financing merits the complete attention of all (including that of lawyers) and is a priority for the world community.
AML-CFT matters and other significant banking/financial issues (e.g. financial inclusion, digital finance) will be discussed during the Banking and Financial Services Law Commission panel at the 2025 UIA seminar “India: The New Global Manufacturing Hub”. We wait for you!

Barbara Bandiera
President of the UIA Banking and Financial Services Law Commission
Milan, Italy