India's Precious Metals and Stones Sectors Pose Money Laundering Risks, Says FATF
The Financial Action Task Force has called on India to enhance oversight of the precious metals and stones sectors due to concerns over cash transactions that evade monitoring. The latest Mutual Evaluation Report reveals significant money laundering and t
FatfMoney LaunderingTerrorist FinancingPrecious MetalsStonesIndiaGems And Jewellery Export Promotion CouncilReal EstateSep 19, 2024
The precious metals and stones sector holds deep cultural significance in India and is a key store of value for many. India is the world's second-largest gold consumer, the top importer, and the leading exporter of gold jewellery. The sector contributes about 7% to the nation's GDP.
However, the report notes that India's cash transaction limit for businesses, set at over ₹2 lakh, is stricter than FATF's anti-money laundering (AML) and counter-terrorist financing (CFT) threshold. Despite this, DPMS are regulated through a mix of tax, incorporation, hallmarking, and import/export requirements rather than a single unified strategy.
The report also questions the effectiveness of the penalty provisions and notes that the requirement for only DPMS registered with the Bureau of Indian Standards (BIS) to hallmark and sell precious metal jewellery was introduced only recently in April 2023.
The findings stem from a review of India's financial system conducted during a site visit in November 2023. The review found progress in monitoring terrorist financing but noted that recent guidelines, such as those for virtual asset providers, are not yet fully assessed.
Frequently Asked Questions
What is the Financial Action Task Force (FATF)?
The Financial Action Task Force (FATF) is an inter-governmental body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing, and the financing of proliferation of weapons of mass destruction.
What is the Mutual Evaluation Report?
The Mutual Evaluation Report is a comprehensive assessment of a country's anti-money laundering and counter-terrorist financing (AML/CFT) regime, conducted by the FATF.
What are the primary money laundering risks in India?
According to the report, India's primary money laundering risks involve fraud, including corruption, cyber fraud, and drug trafficking.
What is the significance of the precious metals and stones sector in India?
The precious metals and stones sector holds deep cultural significance in India and is a key store of value for many. India is the world's second-largest gold consumer, the top importer, and the leading exporter of gold jewellery.
What is the consequence of a country being placed on the FATF 'grey' or 'black' list?
A country placed on the FATF 'grey' or 'black' list may face difficulties in accessing international borrowing and may be subject to enhanced scrutiny by financial institutions.
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