Mutual Evaluation of AML/CFT - FATF
Mutual Evaluation(ME)
FATF
mutual evaluations are in-depth country reports analysing the implementation
and effectiveness of measures to combat money laundering, terrorist and proliferation
financing. The reports are peer reviews, where members from different countries
assess another country. Mutual evaluations provide an in-depth description and
analysis of a country’s anti-money laundering and counter-terrorist financing
system, as well as focused recommendations to further strengthen its system.
During
a mutual evaluation, the assessed country must demonstrate that it has an
effective framework to protect the financial system from abuse.
Mutual
Evaluations have two main components, effectiveness and technical
compliance.
- The most important part of a mutual evaluation is a country’s effectiveness ratings. This is the focus of an on-site visit by a team of experts to the assessed country. During this visit, the assessment team will require evidence that demonstrates that the assessed country’s measures are working and delivering the right results. What is expected from a country differs, depending on the money laundering, terrorist financing and other risks it is exposed to.
- The assessment of technical compliance is also an important part of a mutual evaluation. The assessed country must provide information on the laws, regulations and any other legal instruments it has in place to combat money laundering and the financing of terrorism and proliferation.
The
mutual evaluation report is an assessment of a country’s measures to combat
money laundering and the financing of terrorism and proliferation of weapons of
mass destruction. This includes an assessment of a country’s actions to address
the risks emanating from designated terrorists or terrorist
organisations. The mutual evaluation report is without prejudice to the
status or justification that led to the designation of an entity as a terrorist
or terrorist group or organisation.
The
FATF conducts peer reviews of each member on an ongoing basis to assess levels
of implementation of the FATF Recommendations, providing an in-depth
description and analysis of each country’s system for preventing criminal abuse
of the financial system.
FATF - Style Regional Bodies
Nine FATF-Style Regional Bodies have been established. The
FATF-style regional bodies are:
·
Asia/Pacific Group on Money Laundering (APG) based in
Sydney, Australia;
·
Caribbean Financial Action Task Force (CFATF) based in
Port of Spain, Trinidad and Tobago;
·
Eurasian Group (EAG) based in Moscow, Russia;
·
Eastern & Southern Africa Anti-Money Laundering
Group (ESAAMLG) based in Dar es Salaam, Tanzania;
·
Central Africa Anti-Money Laundering Group (GABAC)
based in Libreville, Gabon;
·
Latin America Anti-Money Laundering Group
(GAFILAT) based in Buenos Aires, Argentina;
·
West Africa Money Laundering Group (GIABA) based in
Dakar, Senegal;
·
Middle East and North Africa Financial Action Task
Force (MENAFATF) based in Manama, Bahrain;
The APG, in conjunction with the FATF and the other eight regional bodies,
constitute a global network to combat money laundering, the financing of
terrorism and the financing of proliferation of weapons of mass destruction. The
FATF's 40 recommendations are the principal standards to combat these
crimes.
The ME Process
A mutual evaluation involves a team
of experts drawn together from FATF - Style Regional Bodies of the member jurisdictions (specially trained and
qualified in the FATF's assessment methodology). The team consists of:
- Legal experts;
- Financial and regulatory experts; and
- Law enforcement experts (including FIU experts).
Technical Compliance
A desk-based technical
compliance analysis assesses compliance by an APG member with the specific
requirements of each of the 40 FATF recommendations - the relevant legal and
institutional framework of the jurisdiction, and the powers and procedures of
competent authorities. These recommendations represent the building blocks of
an AML/CFT system.
The technical compliance analysis is
undertaken by an assessment team prior to an on-site visit of the member
being evaluated.
Effectiveness Analysis
An effectiveness
analysis assesses the extent to which an APG member achieves a
defined set of outcomes that are central to a proper functioning and
effective AML/CFT system with expected results based on the ML
and TF risk profile of that jurisdicition. Experts forming the assessment
team use "11 immediate outcomes," including core issues for each
outcomes, in the 2013 methodology.
The effectiveness analysis is not just based on information exchanged with the assessment team. After the information is exchanged the team will visit the member under evaluation (usually for two weeks, sometimes longer) and interview government and private sector officials to gain a comprehensive understanding of how the AML/CFT system is working. Private sector participation is central to gaining this understanding.
FATF and India:
India became a member of FATF in 2010. India is also a member of two FATF Style Regional Bodies (FSRBs)- Asia Pacific Group (APG) and Eurasian Group of Combating Money Laundering and Financing of Terrorism (EAG). The core work of FATF is to conduct Mutual Evaluation of its Members and to guide and assist SRBs to conduct Mutual evaluationof their respective member jurisdictions. India’s last Mutual Evaluation was conducted in the year 2010 and the next Mutual Evaluation is scheduled to begin in the year 2020-21 based on the revised standards of FATF(40 recommendations and 11 Immediate Outcomes). The Mutual Evaluation is a very comprehensive and in tense exercise and evaluates the antimony laundering and combating terror financing (AML/CFT) ability of a country’s financial sector.
The India & Mutual Evaluation AML/CFT
Function of FATF
Cell:
1. Consequent to the
decision taken by the Cabinet Secretariat, , work relating to Financial Action
Task Force (FATF) and the related Inter-Ministerial Coordination has been
transferred from Department of Economic Affairs (DEA) to Department of Revenue(DOR) (vide GOI Gazette Notification dated 9th Nov, 2017).
2. FATF Cell was
constituted in DoR in 2017 and currently has four OSDs, 1 Director and four
ASOs working under the supervision of and reporting to Join Secretary (Revenue)
.
3. Coordination of
work related to FATF Secretariat is the main functionof FATF Cell. As part of
this, FATF Cell coordinated with agencies of India’s ML/TF infrastructure
namely ED,FIU-IND,RBI, SEBI,IRDAL,MHA,NIA,MEA etc.
4. The Cell receives, circulates and discusses
various papers/proposals related to FATF, .APG, EAG with all the concerned
stakeholders within the country and comments of India are sent on these issues,
keeping national interests in view.
5. The FATF Cell also nominates Indian
delegates for foreign deputation concerning plenary/meetings namely plenaries
and other important meetings of FATF, APG and EAG. Officers of the FATF Cell
also participate in; these meetings and the delegation takes part oin the
multilateral discussions on various issues.
6. Currently, the
FATF Cell is coordinating the work related to India’s upcoming mutual
evaluation. JS (Revenue) is the national coordinator and Director (FATF) is the
Deputy national coordinator or the Mutual evaluation exercise.
7. An important part of FATF mutual evaluation
is to conduct National Risk Assessment where risk of various sectors of the
economy like banking, Insurance, Capital Markets, Designated Non-Financial
Business and Profession sectors etc. are assessed periodically. FATF Cell, DoR
functions as the coordinator for conducting India’s ML/TF NRA.
8. An
Inter-Ministerial Coordination Committee has been constituted under the
Chairpersonship of Revenue Secretary under S.72A of PMLA with the mandate of
macro-level policy decision making on AML/CFT matters, operational co-operation
between the Government, law enforcement agencies, the financial Intelligence
Unit-India and the regulators or supervisors, and supervision of National Risk
Assessment (NRA).
9. An AML/CFT Join Working Group has been
created under the chairpersonship of Additional Secretary (revenue) for
enhancing operational co-ordination among all stakeholders.
The India ME Report(MER) 2024
The India
MER 2024 summarises the AML/CFT measures
in place in India as at the date of the on site visit from 6 to
24 November 2023. It analyses the level of compliance with the FATF 40
Recommendations and the level of effectiveness of India’s AML/CFT system and
provides recommendations on how the system could be strengthened
Happy Reading,
Those who read this, also read:
1. AML/CFT International Cooperation: APG Group
2. National Risk Assessment - India
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