India faces money laundering, terrorist financing risk: IMF

India, which has witnessed numerous terror attacks and still remains a potential target for such strikes, faces significant money laundering and terrorist financing risk, the IMF has warned.

The International Monetary Fund in its report "India: Observance of Standards and Codes FATF Recommendations for Anti-Money Laundering and Combating the Financing of Terrorism" however appreciate the steps taken by New Delhi to counter money laundering and terrorist financing.

The report dated July 2010 was released Monday.

"As a leader among the emerging economies in Asia with a strongly growing economy and demography, India faces a range of money laundering and terrorist financing risks," it said.

"The main sources of money laundering in India result from a range of illegal activities committed within and outside the country, mainly drug trafficking; fraud; counterfeiting of Indian currency; transnational organised crime; human trafficking; and corruption," the report said.

"India continues to be a significant target for terrorist groups and has been the victim of numerous attacks.

 There are no published figures of terrorist cells operating in the country," it said.

Based on a threat assessment, India has identified the following major sources for terrorist financing (FT): funds/resources from organisations outside India, including foreign NPOs; counterfeiting of currency; and criminal activities including drug trafficking and extortion.

According to the report, since mid-2009, India has increased its focus on money laundering and the use of the money laundering (ML) provisions.

However, there are still some important and in some instances, long-standing legal issues, such as the threshold condition for domestic predicate offences, that remain to be resolved.

Effectiveness concerns are primarily raised by the absence of any ML convictions, it said.

Key recommendations made to India include the need to: address the technical shortcomings in the criminalisation of both money laundering and terrorist financing and in the domestic framework of confiscation and provisional measures; broaden the CDD obligations with clear and specific measures to enhance the current requirements regarding beneficial ownership.