Civil society groups have put together a series of reports to provide context to the Financial Action Task Force ahead of its scheduled visit to the country in November for an evaluation exercise. The Paris-based watchdog brackets countries with weak terror-financing and money-laundering laws in “grey” or “black” lists that could hamper their international borrowing ability.

In the reports published on October 29, the non-profit organisations have accused the Indian government of being overzealous in implementing laws meant to deal with financial crimes. The “misuse of the financial integrity framework” – which includes legislation to purportedly comply with the task force’s recommendations – has led to “deep fear and anxiety” in the sector, the reports say.

Simultaneously, civil society representatives have claimed that the country’s opaque electoral bond scheme “presents a serious risk of money laundering and channeling illegal money in the electoral processes”.

The reports have been prepared by Amnesty International and the American Bar Association, among others.

Misuse of laws and agencies

The civil society reports flagged legislations such as the Foreign Contribution (Regulation) Act, Unlawful Activities (Prevention) Act, the Prevention of Money Laundering Act, and agencies such as the National Investigation Agency and the Enforcement Directorate – all of which were concieved of to meet the task force’s standards – as being abused by the current regime to stifle the sector.

Invoking provisions of the Foreign Contribution (Regulation) Act, which regulates foreign funding to nonprofit groups, the Indian government canceled the licences of more than 20,000 groups, stated one of the reports. This “effectively destroyed their ability to deliver services”, the report claimed.

The FATF’s recommendations also led to the amendment of the Prevention of Money Laundering Act and the “weaponising” of the Enforcement Directorate, the authors of the report alleged. “A scrutiny of the cases investigated by the ED would make it amply evident how the government has used the ED as a tool to stifle dissent in India,” it added.

In a statement in October, the FATF said its standards “are designed to ensure legitimate charitable activities are not disrupted or discouraged”.

‘Illegal’ electoral bonds

Even as the government revved up the scope of such legislations and agencies, it “illegally” introduced the electoral bond scheme that “is not merely opaque and non-transparent but opens a floodgate for money laundering through legal means”, said one of the reports.

It added, “This clearly shows the double standard adopted by the Indian government and establishes that it is not committed to ensuring compliance with FATF standards which promotes transparency in financial transactions across the globe.”

The report urged the FATF to recommend that the Indian government “abrogate” electoral bonds.