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India has secured a major position in global financial governance after being elected vice-president of the Financial Action Task Force (FATF), the world’s foremost watchdog against money laundering, terror financing and the funding of weapons of mass destruction.
The development marks the first time New Delhi will occupy the second-highest leadership role in the Paris-based organisation since joining it as a full member in 2010.
Senior Indian Administrative Service (IAS) officer
Vivek Aggarwal will serve as FATF Vice-President from July 2026 to June 2027, working alongside the incoming United Kingdom presidency.
The appointment places India at the centre of international efforts to strengthen financial integrity, tackle illicit financial networks and address emerging threats posed by new technologies, digital payments and virtual assets.
Yet for many people outside policy circles, the FATF remains a little-known institution despite its enormous influence over governments, banks, investors and financial systems worldwide.
What is the FATF?
The Financial Action Task Force was established in 1989 during a summit of the Group of Seven (G7) nations in Paris.
At the time, governments around the world were becoming increasingly concerned about the rapid growth of international drug trafficking and the movement of illicit money across borders. Criminal organisations were taking advantage of expanding global financial systems to conceal the origins of their funds and move money between countries with relative ease.
To address these concerns, leading economies decided to create a specialised intergovernmental body tasked with developing a coordinated international response to money laundering.
Over the following decades, however, the organisation’s responsibilities expanded dramatically.
A major turning point came after the September 11, 2001 terrorist attacks in the United States. Governments realised that terrorist organisations relied on complex funding networks that often crossed multiple jurisdictions. In response, the FATF broadened its mandate to include combating terrorist financing.
Another expansion occurred in 2012 when the organisation added the fight against proliferation financing to its mission. This area focuses on preventing funds from being used to support programmes related to nuclear, chemical or biological weapons.
As a result, the FATF today serves as the principal international standard-setting body in three key areas: anti-money laundering, counter-terrorist financing and counter-proliferation financing.
Although it cannot directly pass laws or impose regulations on sovereign nations, its recommendations have become the benchmark that governments around the world use when designing financial crime legislation and enforcement systems.
What is the FATF’s global reach?
While the FATF itself consists of 40 members, its influence extends far beyond those countries and organisations. Its membership includes some of the world’s largest economies as well as regional institutions such as the European Commission and the Gulf Cooperation Council.
Through cooperation with nine FATF-Style Regional Bodies (FSRBs), the organisation’s standards are applied across a network covering more than 200 jurisdictions.
This extensive reach means that decisions taken within the FATF framework can affect nearly every major financial centre in the world.
For international banks, investment firms and financial institutions, compliance with FATF standards has become a critical requirement. Governments seeking foreign investment or integration into global financial markets are also expected to align their regulatory systems with the body’s recommendations.
Consequently, the FATF occupies a unique position. It is not a treaty-based organisation with direct enforcement powers, yet its influence on global financial behaviour is immense because of the importance attached to its assessments and standards.
How does the FATF evaluate countries and enforce compliance?
The FATF relies on several mechanisms to encourage countries to strengthen their financial safeguards.
At the centre of its framework are the FATF’s 40 Recommendations. These recommendations serve as the internationally accepted blueprint for preventing illicit financial activity.
They cover a wide range of issues, including banking oversight, customer identification requirements, cross-border financial transfers, regulation of virtual assets, monitoring of financial institutions and powers granted to law enforcement agencies.
However, the FATF does not simply issue standards and move on.
Countries are periodically subjected to an intensive review process known as a Mutual Evaluation. During these assessments, teams of international experts examine whether governments have implemented appropriate legal and regulatory frameworks and whether those frameworks are producing measurable results.
The evaluations focus not only on legislation but also on practical effectiveness. Authorities assess whether financial crimes are being investigated, whether prosecutions are taking place, whether convictions are secured and whether criminal assets are being confiscated.
In essence, countries are judged on both the existence of rules and their actual enforcement. This system has become one of the most influential peer-review mechanisms in international governance.
What are the FATF grey list and black list?
One of the most widely discussed aspects of the FATF’s work is its monitoring process for jurisdictions that fail to meet required standards. Countries found to have significant deficiencies can be placed under enhanced scrutiny through public monitoring lists announced during FATF plenary meetings.
The first category is the grey list, formally known as jurisdictions under increased monitoring.
Countries on this list have identified weaknesses in their anti-money laundering or counter-terror financing systems but have agreed to work with the FATF under a structured action plan to address those shortcomings.
Grey-listing does not mean a country is considered non-cooperative. However, it signals that serious deficiencies have been identified and that international monitoring will continue until reforms are completed.
The second category is the black list, formally referred to as high-risk jurisdictions subject to a call for action.
This category is reserved for countries considered to have severe and unresolved deficiencies or inadequate cooperation with international efforts.
As of 2026, Iran, North Korea and Myanmar remain on the blacklist. Although the FATF does not directly impose economic sanctions, placement on either list can have significant consequences.
Financial institutions often increase due diligence requirements, investors may become more cautious, borrowing costs can rise and international lenders may view the affected country as a higher-risk destination.
In many cases, the reputational damage associated with FATF listing becomes a major concern for governments seeking foreign investment and access to international capital.
Why is India’s election to the vice-presidency important?
India’s appointment represents a notable diplomatic achievement and reflects the country’s growing role in international financial governance.
The vice-president does not possess unilateral authority to make FATF decisions. The organisation functions through consensus among its members, and major determinations are collectively made.
Nevertheless, the position carries considerable influence. The vice-president works closely with the president in coordinating discussions, facilitating negotiations and helping shape priorities within the organisation. The role also contributes to building agreement among members on emerging policy challenges.
This means India will now have a stronger voice in debates concerning money laundering, terror financing, virtual assets, digital payment systems and other evolving financial risks.
The appointment is also being viewed as recognition of India’s engagement with FATF processes and its performance during recent evaluations.
Indian officials have pointed to the country’s efforts to strengthen anti-money laundering mechanisms, improve regulatory oversight and enhance supervision of emerging financial technologies.
Following his election, Aggarwal said, “This appointment is a recognition of India’s collective effort and of the strength of our anti-money laundering and counter-terrorist financing framework.”
Revenue Secretary Arvind Shrivastava similarly described the development as a “proud milestone”
that reaffirmed India’s commitment to safeguarding the integrity of the international financial system.
The elevation also coincides with India’s emergence as a major digital economy. The country’s experience in areas such as digital payments and oversight of virtual asset service providers has increasingly drawn international attention.
As global regulators grapple with challenges posed by cryptocurrencies, decentralised finance and other technological innovations, India is expected to contribute more actively to international policy discussions.
How does the new role align with India’s security priorities?
India has long argued that terrorist organisations cannot operate without access to financial resources. Successive governments have therefore emphasised the importance of disrupting funding channels linked to extremist groups.
Indian policymakers have consistently advocated stronger international cooperation against terrorist financing and have called for greater accountability for states accused of failing to take action against such networks.
Within this context, the FATF has been viewed as one of the most important multilateral platforms available to address concerns relating to cross-border terrorism.
India’s new leadership position does not provide the authority to target specific countries independently. However, it does increase New Delhi’s visibility and influence within discussions concerning international responses to terror financing.
Officials and analysts see the development as consistent with India’s broader objective of promoting a zero-tolerance approach to terrorism and strengthening international enforcement mechanisms.
Why has Pakistan frequently been associated with FATF scrutiny?
Few countries have attracted as much attention within FATF discussions as Pakistan. Over the years, Pakistan has appeared repeatedly on the organisation’s grey list and has become one of the most prominent examples of a jurisdiction subjected to extensive monitoring.
Pakistan was placed under increased monitoring from 2008 to 2010, again from 2012 to 2015 and most recently from 2018 to 2022.
During these periods, FATF assessments identified a range of shortcomings in the country’s anti-money laundering and counter-terror financing framework.
Among the concerns raised were failures related to action against internationally designated terrorist figures, weaknesses in enforcement mechanisms and shortcomings in implementing sanctions.
FATF reviews also highlighted concerns regarding the effectiveness of measures intended to freeze assets connected to terrorist organisations.
Another recurring issue involved the misuse of charitable and non-profit organisations. Authorities were concerned that certain entities could potentially be exploited as channels for raising and transferring funds.
Informal money transfer systems, including hawala and hundi networks, also featured prominently in discussions. Such mechanisms can operate outside conventional banking channels, making oversight and monitoring more difficult.
The FATF concluded that stronger controls were required in multiple areas to prevent financial systems from being used to support illicit activities.
How did Pakistan leave the grey list and what happens now?
Pakistan’s removal from the grey list in October 2022 followed an extensive reform process.
To satisfy FATF requirements, the country implemented a dual action plan containing 34 separate commitments. These measures covered legislative reforms, enforcement actions, institutional strengthening and improvements to monitoring systems.
The process required Pakistan to demonstrate progress in addressing identified weaknesses and implementing the necessary reforms.
After completing the required benchmarks, the country was removed from the list.
However, its exit did not mean the end of oversight.
Pakistan continues to be monitored through relevant regional mechanisms, including the Asia/Pacific Group on Money Laundering. International observers continue to assess whether reforms remain effective and sustainable over time.
The issue has remained politically significant in India. Following the Pahalgam terror attack in 2025, Indian officials indicated that New Delhi would advocate
closer examination of Pakistan’s anti-money laundering and counter-terror financing record within international forums.
At the same time, experts caution against assuming that India’s vice-presidency automatically changes Pakistan’s position within the FATF framework.
Decisions relating to grey-listing or black-listing are based on technical assessments and consensus among member jurisdictions. No single country, regardless of its position, can unilaterally determine the outcome.
With inputs from agencies
