FATF Private Sector Collaborative Forum 2025

• 27 Mar 2025

Why in News? 

Mumbai is going to host the Financial Action Task Force (FATF) Private Sector Collaborative Forum (PSCF) 2025 from 25 to 27 March 2025. 

• The Reserve Bank of India (RBI) and the Department of Revenue, Ministry of Finance, will organize the event, reaffirming India’s leadership in global efforts to combat money laundering and terrorist financing. 

 Key Points 

• India’s Leadership Initiatives: 
  • India plays a key role in FATF’s global initiatives and serves as a member of the FATF Steering Group while also co-chairing the Risks, Trends, and Methodologies Working Group. 
  • India hosted the Eurasian Group (EAG) Plenary on Anti-Money Laundering and Counter-Terrorism Financing (AML/CFT) in Indore in November 2024, reinforcing its leadership in regional anti-money laundering efforts. 
    • India’s FATF Mutual Evaluation Report was tabled in June 2024 at the FATF Plenary in Singapore and released in September 2024. 
  • India achieved ‘regular follow-up’ status, a distinction awarded to only a few countries in FATF’s Mutual Evaluations. 
  • The FATF report commended India’s efforts in curbing financial crimes, particularly its advanced fintech ecosystem, UPI-based transactions, Aadhaar-enabled digital identity verification, and inter-agency coordination. 
  • India’s tech-driven financial security approach has set a global benchmark for integrating innovation with AML/CFT strategies. 
• Significance of PSCF 2025: 
  • PSCF is an annual FATF event that provides a crucial platform for dialogue between FATF member countries, international organizations, and private sector stakeholders. 
  • The forum aims to strengthen AML/CFT implementation by fostering international collaboration, sharing best practices, and addressing emerging financial crime threats. 
  • Participants will include representatives from FATF’s Global Network countries, financial institutions, designated non-financial businesses and professions (DNFBPs), virtual asset service providers (VASPs), international organizations, and academia. 

 Financial Action Task Force (FATF) 

• About: 
  • FATF is the global money laundering and terrorist financing watchdog set up in 1989 out of a G-7 meeting of developed nations in Paris. 
• Objective: 
  • Initially, its objective was to examine and develop measures to combat money laundering. 
  • After the 9/11 attacks on the US, the FATF in 2001 expanded its mandate to incorporate efforts to combat terrorist financing. 
  • In April 2012, it added efforts to counter the financing of proliferation of Weapons of Mass Destruction (WMD). 

 Money Laundering 

• About: 
  • Money laundering is a complex process used by individuals and organisations to conceal the origins of illegally obtained money. It involves making illicit funds appear legitimate through a series of transactions. 
• Stages: 
  • Placement: The initial stage where illicit funds are introduced into the financial system. This can involve deposits into bank accounts, currency exchanges, or purchases of valuable assets. 
  • Layering: The process of separating the illicit funds from their source through a series of complex financial transactions. This often involves transferring funds between accounts or across borders to obscure their origin. 
  • Integration: The final stage where the laundered funds are reintroduced into the economy as legitimate funds. This can involve investing in businesses, purchasing real estate, or other means of legitimising the funds. 

 Terror Financing 

• According to the International Monetary Fund (IMF) and World Bank, criminals launder an estimated two to nearly four trillion dollars each year. Fund movements by terrorists have also been concealed through charities and alternative remittance systems. 
  • It taints the international financial system and erodes public trust in the integrity of the system. 
  • Furthermore, the lack of regulation of cryptocurrency could make it a breeding ground for terrorists.