India must step up its oversight of transactions involving gold and precious metals as they go unchecked because of cash dealing, suggested the Financial Action Task Force in its evaluation report released on Thursday.
According to the anti-money laundering watchdog, India has approximately 1,75,000 enterprises in this industry, but only about 9,500 of them are registered with the Gem and Jewellery Export Promotion Council, which checks identity.
At the same time, India is one of the world's largest importers of gold and a significant processor and exporter of diamond jewellery.
"The dealers in the precious metals and stones (DPMS) sector fall outside the scope of preventive measures due to tax law provisions relating to cash threshold prohibition," the FATF stated.
The suggestions follow a review of India’s financial system through a site visit in Nov. 2023. It also suggested that India expedite prosecution in financial fraud cases.
The report, while making recommendations, said that India should coordinate risk-based oversight on non-profit organisations so that it should not be misused for terror financing.
Besides, it has asked India to improve technical compliance for politically exposed persons in the home country.
The report acknowledged that India has developed an effective anti-money laundering and combating the financing of terrorism framework in many respects.
Applauding the country’s system to tackle the menace of money laundering and terror financing, it categorises the country in the "regular follow-up" group, a classification shared by only four other G20 countries, including Italy and the UK.
The report analyses the level of compliance with the FATF 40 recommendations and the level of effectiveness of India's AML/CFT system and provides recommendations on how the system can be strengthened.
Following the Paris-based organisation's June plenary session approval of the assessment, the 368-page report was made public on Thursday.
India will undergo its next evaluation in 2031. However, it will undertake voluntary risk assessment every three years.
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