India's laws cannot counter terror-funding, says G7 task force

Neelabh Srivastava
New Delhi, Jul 18 (PTI) A global task force which tracks
money laundering and terrorist financing across national
borders, has raised doubts about the efficacy of India's laws
in combating this dual menace.
The multi-national Financial Action Task Force (FATF) is
an inter-governmental organisation founded in 1989 by the G7
(Group of seven industrialised nations) to develop policies to
combat money laundering and terrorist financing.
FATF, which admitted India as its the 34th member last
month, has in its report identified fund transfers from
foreign Non Profit Organisations (NPOs), counterfeiting of
currency, drug trafficking and extortion as "major sources for
terrorist financing" in the country.
"India does not maintain a unified database for NPOs...
statistics on the number of registered NPOs under the various
statutes are not generally available in India. However, by
government estimates, there are approximately two million
foreign and domestic NPOs operating in India.
"India has not yet undertaken a review of its NPO sector,
as envisaged by the FATF standards. There has been no
effective outreach to the NPO sector by the Government of
India or by state governments in relation to risks and
vulnerabilities of the sector to terrorist financing abuse,"
the report says.
In a scathing indictment of the effectiveness of the
Indian laws to monitor and counter terror funds and money
laundering, the report said, "except under the Income Tax Act
and the Foreign Contribution (Regulation) Act, the NPO sector
is subject to limited or no monitoring and supervision, but
the NPOs registered under these Acts only account for a small
number of entities within the sector."
The FATF also expressed doubts about the effectiveness
of laws like the Narcotic Drugs and Psychotropic Substances
Act (NDPS) in existence since 2001 and the Prevention of Money
Laundering Act, in force from 2005 in the country but there
being a "total absence" of any money laundering convictions in
these cases till date.
"In addition, given India's vulnerability to terrorism
and the large number of actual terrorist attacks per year, the
number of terrorist related Suspicious Transaction Reports
(STRs) also appears to be extremely low, raising further
questions about the implementation and effectiveness of the
STR reporting obligation," the report added.
Banks and financial institutions submit STRs to the
Finance Ministry's Financial Intelligence Unit (FIU) which
forwards to other investigative agencies all reports suspected
to involve terror funding and money laundering. PTI NES
MRD