n November 2023, a Financial Action Task Foce team visited India for the fourth round of ‘mutual evaluations’ as an on-site assessment to ensure the effectiveness and technical compliance with its recommendations on the relevant laws and regulations implemented by its members. The assessment is likely to be tabled in the plenary discussion in June 2024. The trip was due for the last 10 years as India did not allow FATF to carryout assessment on one pretext or the other.

The FATF conducted its last assessment in 2013. After that it desired to visit India in 2019. However, the visit was deferred by India on account of Covid-19. Now that the visit has materialised, it is expected that India’s black economy conundrum and the use of illegal money for terror financing will be unearthed.

Pakistan has faced the FATF for years. For quite some time it was on the Grey List and India lobbied hard for its inclusion in the Black List. However, Pakistan eventually steered its way out of the troubled waters. Now that India is under the FATF watch, it seems difficult for it to escape observation, considering how Pakistan, Canada and the US have been complaining about international terror networks being operated from India.

The repute of Indian economy has been tainted on account of its lack of transparency. There are big scams shrouded under the state-sponsored layers of deception. There are two types of problems in India with regard to Anti-Money Laundering/ Countering Financing of Terrorism (AML/ CFT) obligations. One, that many Indian organisations and departments do not have a clear idea of their obligations and how they are supposed to handle these; two, that the Indian government is accused of using FATF obligations to silence dissidents. Also, sectors such as real estate and those dealing with precious metals/ gem stones and small businesses lack transparency. This leads to gaps in compliance.

According to a survey, the size of Indian black economy is around $500 billion. The undocumented money is multiplied through real estate sector and invested in gold. The dividends are then utilised for various crimes and terror financing that Indian government supervises around the globe. The real-estate sector, which is spread across India, is known for frauds/ scams, unauthorised money pooling, stashing of illicit money, price manipulation and giving rise to money laundering. As per Enforcement Directorate of India, the real estate sector accounts for 35 per cent cases of money laundering. The size of the Indian real estate market is $263.37 billion in the current year. It is anticipated to register a compound annual growth rate of 20.51 per cent until year 2028. Despite growing at a phenomenal rate there is no precise estimate of real estate agents in India.

There has been a vivid difference in the FATF’s treatment of Pakistan and India. While Pakistan was squeezed, India, despite having a chequered record, was left unleashed. This leniency helped terror financing and other illegal practices. 

As per estimates, almost a third of the world’s gold passes through India’s borders. Over a quarter of India’s gold sector is tainted with gold from questionable sources with unknown international links. Gold imported into India is linked to conflict, human rights violations, smuggling, child labour, corruption and other abuses in Africa and South America. Illicit gold entering the country is absorbed into the legal market and re-exported as jewelry.

Corruption is a significant challenge in India and undermines effectiveness of the AML/ CFT measures. There is glaring lack of effective international cooperation despite the fact that India has signed several international treaties and agreements to enhance cooperation in fight against money laundering. While there are loopholes in implementation of AML/ CFT, the Indian government, under the guise of combating terrorism and money laundering, has been misusing financial and counterterrorism laws, by routinely attacking and silencing dissenting political voices.

The use of anti-terror laws against the media organisations and its journalists is an alarming reminder of the Indian government’s intent to crack down on free press and systematically silence opposing voices. It has targeted many media outlets and non-profits organisations, including Amnesty International.

As part of its compliance with the FATF recommendations, India has passed laws and amendments, including the PMLA and the Foreign Contribution Regulation Act. In 2012, the Unlawful Activities Prevention Act was amended to expand its scope. This was a condition for India becoming the 34^th member of the FATF. The UAPA, India’s main counterterrorism law, is now being used against media houses and their journalists. The FCRA too has been used as a tool to quash dissent. The FCRA affords wide-ranging powers to the Ministry of Home Affairs to suspend and cancel any NGO’s registration. Consequently, over the last 10 years, more than 20,600 NGOs have had their licenses cancelled.

There has been a vivid difference in the FATF’s treatment of Pakistan and India. While Pakistan was squeezed, India, despite having a chequered record, was left unleashed. This leniency has helped terror financing and other illegal practices in India to grow. India’s alignment with the US and allies also acceded leverage to India.

Now that the FATF has conducted its long pending review, the mess in Indian economy, it’s illegal and criminal activities and abuse of Indian government’s commitments with the FATF should be noticed. The FATF must watch out for what is happening in India and should take requisite actions to curb such malpractices.

The writer is communication strategist at the Institute of Regional Studies, Islamabad. She can be reached at reema.asim81@gmail.com