Doubts over adequacy of Indian laws to deal with terror funds
Global Task Force Identifies fund transfers from NPOs for terrorist financing.
By ET Bureau |
NEW DELHI: Identifying fund transfers from foreign Non-Profit Organisations (NPOs), counterfeiting of currency, drug trafficking and extortion as “major sources for terrorist financing” in India, a global task force has raised questions about the adequacy of the country’s laws in dealing with them.
The Financial Action Task Force (FATF), 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, had admitted India as its 34th member last month.
“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,” it said in its report.
The FATF said that India has not yet undertaken a review of its NPO sector, as envisaged by standards set by the body. “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 said.
The report expressed doubts about the effectiveness of Indian laws to deal with terror funds and money laundering. “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," it said.
Further, the report was categorical in its apprehensions about the execution and effectiveness of laws like the Narcotic Drugs and Psychotropic Substances Act (NDPS) in existence since 2001 and the Prevention of Money Laundering Act. Though these have been in force in India from 2005, there has been "total absence" of any money laundering convictions in these cases, it pointed out.
"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.
STRs are submitted to the finance ministry’s Financial Intelligence Unit (FIU) by banks and financial institutions. All reports suspected to involve terror funding and money laundering are then referred to investigative agencies.
The Financial Action Task Force (FATF), 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, had admitted India as its 34th member last month.
“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,” it said in its report.
The FATF said that India has not yet undertaken a review of its NPO sector, as envisaged by standards set by the body. “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 said.
The report expressed doubts about the effectiveness of Indian laws to deal with terror funds and money laundering. “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," it said.
Further, the report was categorical in its apprehensions about the execution and effectiveness of laws like the Narcotic Drugs and Psychotropic Substances Act (NDPS) in existence since 2001 and the Prevention of Money Laundering Act. Though these have been in force in India from 2005, there has been "total absence" of any money laundering convictions in these cases, it pointed out.
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"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.
STRs are submitted to the finance ministry’s Financial Intelligence Unit (FIU) by banks and financial institutions. All reports suspected to involve terror funding and money laundering are then referred to investigative agencies.
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