FATF elects Vivek Aggarwal as first Indian Vice President

FATF is an inter-governmental body established in 1989 at the G7 Paris Summit to set global standards for combating money laundering, terrorist financing, and proliferation financing. Its secretariat is housed at the OECD headquarters in Paris. FATF has 39 full members (including India, the EU as a body, and all major economies) plus a network of FATF-Style Regional Bodies (FSRBs) affiliating over 180 countries. FATF does not create binding treaties — instead it issues 40 Recommendations (revised 2012) that countries are expected to incorporate into domestic law.

Key Details

• FATF established: 1989, G7 Paris Summit
• Original mandate: combating money laundering; expanded post-9/11 to include terrorist financing (Special Recommendations, 2001); expanded again in 2012 to include proliferation financing (WMD)
• Grey List (Increased Monitoring): Countries with strategic AML/CFT deficiencies under agreed remediation timelines; triggers higher correspondent banking costs, reduced investment flows
• Black List (High-Risk Jurisdictions): Countries subject to enhanced due diligence and counter-measures; currently (2026): North Korea, Iran, Myanmar
• India joined FATF: 2010
• Plenary sessions: three per year, at OECD Paris headquarters

Money laundering is the process of concealing the origins of illegally obtained money (from drug trafficking, corruption, fraud, etc.) by passing it through a complex sequence of banking transfers or commercial transactions, making it appear as legitimate income. The three stages are: Placement (introducing illegal cash into financial system), Layering (disguising the trail through complex transactions), and Integration (re-entering funds into the economy as apparently legitimate assets).

India's primary domestic instrument is the Prevention of Money Laundering Act (PMLA), 2002, administered by the Enforcement Directorate (ED) under the Department of Revenue, Ministry of Finance. FIU-IND (Financial Intelligence Unit – India), established in 2004, is the nodal agency for receiving, processing, and analysing financial intelligence.

Key Details

• PMLA enacted: 2002; significant amendments in 2005, 2009, 2012, 2019
• PMLA Section 3: defines the offence of money laundering
• PMLA Section 4: punishment — rigorous imprisonment of 3–7 years (up to 10 years for narcotics cases) plus fine
• Enforcement Directorate (ED): investigates PMLA cases; operates under DOPT-Revenue
• FIU-IND established: 2004; submits financial intelligence to law enforcement agencies and international counterparts
• Suspicious Transaction Reports (STRs) are filed by banks and financial institutions with FIU-IND under PMLA obligations

Terrorist financing (TF) involves raising, moving, and using funds for terrorist acts or organisations. It differs from money laundering in that the money may originate from legitimate sources (e.g., charitable donations diverted to terrorism). FATF's Special Recommendations (2001) and UNSC Resolution 1373 (2001) require countries to criminalise TF and freeze terrorist assets. India's Unlawful Activities (Prevention) Act (UAPA), 1967 as amended, addresses both proscription of terrorist organisations and seizure of terrorist assets.

Key Details

• UNSC Resolution 1373 (2001): binding resolution requiring all UN members to criminalise terrorist financing
• Proliferation financing (PF): funding for weapons of mass destruction (WMD) development; added to FATF mandate in 2012 via revised Recommendation 7
• UAPA Amendment 2019: empowered government to designate individuals (not just organisations) as terrorists
• Mutual Evaluation Reviews (MER): FATF peer-review process assessing a country's compliance; India's last MER was in 2022 and received a largely positive rating