FATF Vice President Highlights Role of Regulators in Combating Illicit Finance

The recent meeting between Financial Action Task Force (FATF) Vice President Vivek Aggarwal and Executive Directors of the International Financial Services Centres Authority (IFSCA), Dipesh Shah and K. Mahipal Reddy, in New Delhi represents a significant milestone in India's evolving role in global financial governance. This engagement underscores the critical importance of regulatory cooperation in combating illicit finance, money laundering, and terrorism financing — challenges that transcend national borders and require coordinated international responses. To understand the significance of this development, we must first contextualize the FATF itself. Established in 1989 by the G7 Summit in Paris, the FATF is an intergovernmental body that sets international standards for combating money laundering (AML), terrorist financing (CFT), and proliferation financing. India became a member of FATF in 2010, marking its formal integration into the global financial integrity architecture. The completion of India's mutual evaluation in 2024 — a comprehensive peer review assessing a country's compliance with FATF's 40 Recommendations — was a watershed moment, demonstrating India's commitment to aligning its legal and regulatory frameworks with global benchmarks. Vivek Aggarwal's appointment as FATF Vice President in 2024 is particularly noteworthy. As an Indian national holding a leadership position in this premier standard-setting body, his role signals India's growing influence in shaping global financial regulations. His emphasis on the role of regulatory bodies during the New Delhi meeting highlights a core principle of FATF's methodology: effective implementation of standards depends not just on legislation, but on robust supervision and enforcement by competent authorities. The IFSCA, established in 2020 under the International Financial Services Centres Authority Act, 2019, is central to this narrative. Headquartered in GIFT City, Gujarat, IFSCA serves as a unified regulator for financial products, services, and institutions operating in India's International Financial Services Centres (IFSCs). Its mandate includes banking, capital markets, insurance, and fintech — all under a single regulatory umbrella. This institutional design reflects a strategic policy choice to create a globally competitive financial hub with regulatory standards aligned to international best practices, including FATF norms. The meeting's focus on regulatory cooperation is deeply rooted in India's constitutional and legislative framework. Article 246 read with the Seventh Schedule places banking, insurance, and stock exchanges in the Union List, giving Parliament exclusive legislative competence. The Prevention of Money Laundering Act (PMLA), 2002 — amended significantly in 2009, 2012, and 2019 — forms the backbone of India's AML/CFT regime. The 2019 amendment expanded the definition of "proceeds of crime" and strengthened attachment and confiscation provisions. Furthermore, the Unlawful Activities (Prevention) Act (UAPA), 1967, as amended, addresses terrorism financing. These laws are enforced by agencies like the Enforcement Directorate (ED), Financial Intelligence Unit-India (FIU-IND), and now IFSCA, creating a multi-layered compliance architecture. From a broader perspective, this development connects to several key themes in governance and international relations. First, it reflects India's "Atmanirbhar" (self-reliant) approach to financial sector development — building domestic institutions capable of meeting global standards. Second, it enhances India's credibility in forums like the G20, where financial integrity and regulatory cooperation are recurring agenda items. Third, it supports the vision of making GIFT City a global financial gateway, attracting foreign investment while ensuring regulatory integrity. Looking ahead, the implications are profound. As FATF continues to refine its standards — particularly on virtual assets, beneficial ownership transparency, and non-profit sector oversight — Indian regulators like IFSCA will need to adapt swiftly. The ongoing digital transformation of finance, including the rise of crypto-assets and decentralized finance (DeFi), poses new challenges for AML/CFT frameworks. India's proactive engagement through leadership positions in FATF and strengthened domestic regulation positions it to influence these evolving norms rather than merely adopt them. For competitive exam aspirants, this episode encapsulates the interplay between international organizations, domestic legislation, institutional architecture, and strategic policymaking — a quintessential example of how India navigates global governance while advancing its national interests.