New Delhi: The Financial Action Task Force (FATF) noted that the Foreign Contribution (Regulation) Act is not being used as a targeted tool against terror financing in India-based non-government organisations, but instead monitors all foreign funding regardless of the organisation’s or source’s risk level.
It called for India to ensure that measures against non-profit organisations (NPOs) to prevent terror financing are based on a “risk-based approach”.
This was assessed and opined in India’s second mutual evaluation report that was released on Thursday (September 19) by the FATF.
The report had been adopted during the plenary in June, when the international watchdog had said India had achieved a “high level of technical compliance with the FATF requirements”.
But, as The Wire had reported in June itself, the report also stated that India’s use of laws like the Foreign Contribution (Regulation) Act to clamp down on NGOs was not in line with the “risk-based approach” laid down by the FATF.
The mutual evaluation process, a peer-based review, consists of two components: technical compliance and effectiveness assessment.
This report evaluates India’s compliance with the 40 FATF recommendations for technical compliance and measures the effectiveness of its legal framework against 11 immediate outcomes in its effectiveness assessment.
India achieved a “substantial” effectiveness rating on six of the 11 criteria, while the remaining five were rated as “moderate” compliance.
On the technical ratings component, India was fully compliant with 11 of the 40 recommendations and “largely compliant” with 26. It was only “partially compliant” on the rest.
In the latest report, one of the areas where India was rated “partially compliant” involved NPOs.
The FATF report noted that the measures did not always specifically focus on the NPO sub-sector that could be vulnerable to terrorist financing (TF) abuse, and no review had been conducted to assess the adequacy of those measures.
The report further noted that it was “unclear whether the authorities have consequently adapted their adequacy to be able to take proportionate and effective action to address the risks identified.”
The FATF also observed that while India identified 7,500 NGOs as “high risk”, it did not demonstrate that this monitoring was done in a “risk-based manner, targeted at these NPOs at risk of TF abuse.”
“While these have uncovered TF-related irregularities, the risk-profiling aids are targeted towards uncovering tax irregularities. Thus, it is not clear to what extent the 7,500 NPOs as high-risk dovetails with these mechanisms and how they are taken into account in the monitoring and supervision that takes place,” the report pointed out.
In the list of “priority actions” for India, the report states that India should “ensure that CFT [combating the financing of terrorism] measures aimed at preventing the NPO sector from being abused for TF are implemented in line with the risk-based approach, including by conducting outreach to NPOs on their TF risks.”
“Outreach should be conducted in a more focused coordinated and risk-based manner by the relevant competent authorities, ensuring NPOs at risk of TF abuse enhance their understanding of TF risks, including the sources, channels and end-use of funds as per their respective theatre,” it said.
A US-based civil society group, “Eyes on FATF”, has asserted that the organisation has been lenient towards India.
“While the report finds India ‘partially compliant’ for its intensified crackdown on NGOs, it fails to recognise how its recommendations have been weaponised by India to suppress dissent and target activists, journalists, opposition politicians and civil society organisations.
“These failures undermine the credibility of both India’s evaluation and of FATF as an independent body,” the group stated.
It emphasised that instead of addressing these critical issues, the FATF ranked India in the highest category for technical compliance.
“This is likely to further embolden the government to continue exploiting its legal system to attack human rights defenders and critical voices,” the statement added.
The international human rights group Amnesty International observed that the Indian government had been rapped on its knuckles for its stance against the NGO sector.
“The Indian government must take seriously the priority actions recommended by the FATF report and calibrate its actions to stop the witch-hunt of non-profit organisations, human rights defenders and activists who dare to dissent,” said Aakar Patel, chair of board at Amnesty International India.
