Senior bureaucrats in India hauled up for corruption will be also accused of money laundering under the new global guidelines of the Financial Action Task Force (FATF).
The changes rung in by the global standards body this week mean officers prosecuted for corruption in a country will face higher criminal charges instead of the current limit of seven years? imprisonment.
The far-reaching changes have been approved by the Indian government too as a member of the FATF. India in February last year became a member of the organisation that brings together 34 countries, mostly the developed ones, besides India and China.
Bureaucrats by this definition in India would include officers typically of the level of director and above working within the country or abroad. They have been classified as “politically exposed persons”.
The rationale for the change, explained a source, is that senior officers can often be compromised when they get into corruption. They are then easy conduits for those attempting to launder money through their help. The FATF has accordingly recommended “stronger requirements when dealing with politically exposed persons”.
As a fallout of the recommendations, bureaucrats in India will now have to face strict scrutiny when they approach a bank to open an account for themselves or their relatives. The scrutiny, said the source, will be far more rigorous than a common person faces when opening an account.
The additional scrutiny will also apply to their income tax returns and all financial transactions. Since tax evasion has also been equated with money laundering, the scope of prosecution has increased drastically, people in the know said.
The FATF recommendations will now have to be incorporated by amendments in the Indian Penal Code as well as all the anti-corruption measures to equate money laundering with terrorist financing.
When a member country disregards FATF recommendations, it runs the risk of having its entire financial structure labelled as suspect and prone to money laundering. It drastically increases the cost of doing business for the country and severely affects the flow of capital into the nation. The FATF standards apply not only to the top 34 OECD and other systemically important countries but is also applied by most other nations too.
Explaining the new changes that raise the stakes for money laundering, Giancarlo Del Bufalo, president of FATF, said “adoption of the revised recommendations demonstrate countries’ shared commitment to fight money laundering, terrorist financing and the financing of the proliferation of weapons of mass destruction”.
The strictures on bureaucrats to keep to the straight and narrow is part of the seven changes in the FATF recommendations that have been agreed upon by member countries after two years of negotiations.
India in particular was keen that the stronger measures for bureaucrats as politically exposed persons should go through.
What it does is to make it more difficult for politicians and corrupt bureaucrats to apply for asylum abroad and hope for more lenient treatment. While the reasons for the tighter rules is to make it harder for terrorists to take shelter behind legal entities, the governments will have to do much more.
