The Financial Action Task Force (FATF) is set to publish its final mutual evaluation report for India on September 19, in which India aims to be compliant on 32 out of the 40 standards, a finance ministry official said.

The evaluation, which is part of a rigorous process to ensure adherence to the FATF’s standards, will include key priority recommendations for India.

However, areas such as the supervision of non-financial sectors and the acceleration of prosecutions related to money laundering need improvement, he said.

India, a full FATF member since 2010, aims to leverage the evaluation to strengthen its international standing, particularly in the context of its growing fintech landscape and global recognition of products like the Unified Payments Interface (UPI) and the Indian rupee.

"India’s fintech products like UPI and the rupee getting more credibility internationally will get an impetus if India gets a higher rating," said the official.

Additionally, an improved rating from the FATF would have broader economic implications for India. "An enhanced rating helps reduce India’s borrowing costs, as it increases interest in India’s bonds," the official explained.

FATF’s evaluation process also touches on India’s approach to cryptocurrency regulations. "India follows the FATF standard on crypto to implement anti-money laundering (AML) standards. Peer-to-peer virtual digital asset (VDA) transactions are a concern, and India is not yet fully able to tap into that information," the official added.

Globally, countries that fall under FATF’s "grey list" face an international cooperation review group which prescribes action plans. Currently, South Africa and the UAE are among the major countries on the grey list, while Pakistan recently exited the category. Iran, North Korea, and Myanmar remain on the blacklist.

India has been categorised under the regular follow-up group, a significant achievement, as it places the country in a less stringent compliance regime compared to others. "India, the UK, France, Italy, and Kazakhstan are among the few nations in the regular follow-up category, which is a notable achievement," the official noted. In contrast, countries like Japan, the USA, Australia, Germany, China, and Brazil fall under the "enhanced follow-up" category.

"For countries in enhanced follow-up, the action plan is compulsory, while for those in regular follow-up, it is voluntary," the official clarified.

India is currently undergoing the 4th round of FATF evaluations, with the 5th round set to begin in October 2024. The upcoming evaluation will be critical for India's ambitions to further integrate into the global financial system and enhance its credibility on the world stage.