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FATF in June said India had reached a high level of compliance in enforcing anti-money laundering laws. Image: Shutterstock
The Financial Action Task Force (FATF) global anti-money laundering watchdog has asked India to improve due diligence on the bank accounts of local politicians, government officials and their families, two government sources said.
The recommendation for tougher checks on the finances of politically exposed persons (PEPs) is part of a FATF review of India’s anti-money laundering systems that began in 2023. The group is due to publish its final report soon.
Under global rules, politicians, their families, and close associates are subject to checks on their bank accounts due to their potential susceptibility to bribery and corruption.
A FATF report shared with the government recommended more rigorous monitoring of the source of funds in the accounts of domestic PEPs as well as requiring senior bank managers to approve any new accounts for them or their families.
India already implements strict banking checks on foreign political figures.
The sources, who have been briefed of the FATF’s recommendations, could not be named because they were not authorised to speak to the media. The FATF did not respond to requests for comment.
“There are areas where we need to improve which we will,” a senior finance ministry source said.
Last December, before general elections that brought Prime Minister Narendra Modi back to power, the government told parliament it did not intend to put domestic political figures under stricter banking scrutiny, adding that it would wait for the FATF’s report before making any changes.
The FATF in June said India had reached a high level of compliance in enforcing anti-money laundering laws. The government has five years to implement the recommended banking rules before the next review, one of the sources said.
The FATF rated India as “compliant” and “largely compliant” on 37 out of the 40 parameters for enforcing anti-money laundering laws, the sources said.
The three areas in which there is partial compliance include bank scrutiny of domestic political figures and oversight of the finances of non- profit organisations and non-financial businesses and professionals.
In June, the Indian government described the FATF’s evaluation as yielding an “outstanding outcome” but did not disclose any specifics.
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First Published: Aug 09 2024 | 1:17 PM IST
