The Financial Action Task Force (FATF), a global anti-money laundering organization, is reportedly considering an investigation into India’s utilization of laws to restrict funding to non-profit organizations (NGOs) and civil society groups. According to Bloomberg, FATF is concerned that India, under the leadership of Prime Minister Narendra Modi, might be applying these laws too aggressively, potentially misusing them to target entities like Amnesty International and policy think tanks.
FATF’s Role: FATF is responsible for monitoring and enforcing legal, regulatory, and operational measures to combat money laundering and the financing of terrorism. However, it is now showing an interest in examining the impact of India’s laws on non-profit organizations and civil society groups.
Upcoming FATF Visit: In November, a team from FATF is scheduled to visit India to assess the situation by engaging with NGOs directly. This review could have consequences for India’s international credibility.
Challenges Faced by NGOs: Non-profit organizations in India must register and obtain a license under the Foreign Contribution Regulation Act (FCRA) to receive funds from international sources, a process overseen by the Union home ministry. While the Modi government recently granted an FCRA license to the trust overseeing the construction of the Ram temple in Ayodhya, its approach to NGOs and groups not directly under its control has raised concerns. Amnesty International, for instance, closed its offices in India in 2020, citing continuous harassment from government agencies.
Government Actions: The government has also revoked the ability of organizations like the Centre for Policy Research to raise foreign funds, although the Delhi High Court later intervened to grant them access to 25% of FCRA funds. Since the BJP came to power, the number of organizations holding FCRA licenses has declined sharply, with critics suggesting that this disproportionately affects independent NGOs. As of January 1, 2022, almost 6,000 organizations had lost their FCRA licenses. In December 2016, the FCRA licenses of approximately 20,000 NGOs were canceled due to alleged violations.
FATF’s Position: FATF, in a recent statement, confirmed that it had initiated a “Mutual Evaluation process” and refrained from commenting on India’s actions, emphasizing that their standards are designed to ensure legitimate charitable activities are not disrupted.
Possible Outcomes: It remains uncertain what action FATF might take if its assessors find that the Indian government has abused its powers. This investigation by FATF is unprecedented, as no country has been scrutinized for overzealous use of money laundering laws.
India’s Democratic Backsliding: India’s democratic status has been under scrutiny by various expert groups, with some categorizing it as an “electoral autocracy.” This, along with other concerns, has affected India’s global reputation as a democracy.
FATF’s Global Impact: FATF is known for placing countries with weak terrorist financing and money laundering provisions on its ‘grey’ or ‘black’ lists, which can limit a country’s global borrowing capabilities. Pakistan was on the ‘grey’ list until recently.
Government’s Stance: The Indian government has stated that former Enforcement Director Sanjay Kumar Mishra should remain in his position due to his importance in India’s case before FATF.
Membership and Conclusion: FATF consists of 39 member countries, including India, the US, Japan, France, the European Union, and China. Russia’s membership was suspended in 2023. While India’s foreign and home ministries did not respond to requests for comments, the potential FATF evaluation presents a unique situation, given its focus on India’s approach to money laundering laws concerning NGOs and civil society.
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