‘India must raise the bar on anti-money laundering systems’

FATF review scheduled for this year

With the global money laundering and terror funding watchdog expected to undertake a review of India’s mechanisms to deal with suspicious transactions and financial crimes in 2021, State Bank of India’s compliance head has stressed the need for financial institutions to raise the bar on monitoring such activity.

The Financial Action Task Force (FATF) had deferred its once-a-decade evaluation of India’s anti-money laundering regime scheduled for this year, citing the COVID-19 pandemic, and indicated that the onsite review to be conducted by global experts may now take place in early 2021.

The FATF undertakes peer reviews of each member on an ongoing basis to assess the implementation of its recommendations and provides a detailed analysis of each country’s system for preventing criminal abuse of the financial system.

“The FATF review of India will happen [in 2021]. That is all the more reason why we should get our act together. We want to have a good image of India when the FATF [review] happens,” SBI’s group compliance officer and deputy MD Soma Sankar Prasad said at a conference on anti-money laundering and combating terror financing on Tuesday.

A major challenge in identifying suspicious transactions was the sheer volume in India’s banking system, he pointed out. “SBI itself has 43 crore accounts, so the number of transactions is 15 crore to 20 crore a day. The load is immense, so the quality of transaction monitoring does suffer. Going forward, it is inevitable as technology develops, that we dig deeper so as to play a more effective role against money laundering,” he said.

India’s banks, he said, had already begun using artificial intelligence and machine learning tools to identify transactions that don’t follow the usual pattern.

They are also trying to improve the compliance culture among frontline staff who often fail to get details under the Know-Your-Customer norms.

FATF worked on Pak.

The SBI official said the FATF’s work had been ‘fantastic’ as it had been able to do what UN Security Council resolutions had failed to achieve in terms of taming terror activities in Pakistan.

“The FATF has been really successful in putting Pakistan on a tight leash. After the FATF put restrictions, Pakistan was forced to take a number of steps including putting the main terrorist leaders behind bars. Maybe it was a cosmetic measure, but they were forced to undertake it because they would have been in a huge financial problem otherwise,” he said.

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