FATF’s recently released Mutual Evaluation Report on India has outlined the Indian government’s failure in ensuring that the non-profit sector in the country is not harassed through legal means and only those complicit in the financial irregularities are targeted by the financial regulatory laws. The report flags India as ‘partially compliant‘ on FATF recommendation 8 which mandates that mechanisms for preventing money laundering and terror financing should only be applied against the organisations that are engaged in terror financing.
The report flags India as ‘partially compliant‘ on FATF recommendation 8 which mandates that mechanisms for preventing money laundering and terror financing should only be applied against the organisations that are engaged in terror financing.
Charging the non-profit organisations by misusing various regulations under the false pretexts of corruption goes against the principle. Such laws should only be aimed at those involved in financing terrorism, the report says, and a coherent process of careful analysis should be adopted by the regulatory authorities. The global financial watchdog has asked the Indian government to ensure, by calling for ‘priority actions‘, that the measures are not to be applied to harass and intimidate the Indian civil society under the pretext of money-laundering or terrorism-financing.
While the Indian government might want to cherry pick the positives in the FATF report on India, trying to put the inconvenient sides under the rug. The Financial Action Task Force (FATF) describes in details how the Indian government has not done enough to adopt the effective measures to prevent the abuse that the non-profit sector faces in India.
The report is based on the fourth round of India’s evaluation on its efforts to combat illicit financing. The report also pointed out the significant delay in prosecutions in India under its money laundering and anti-terrorism laws. The report outlines the ‘critical‘ requirement to adopt a cautious and thoughtful approach with non-profit organisations by going with a thorough and independent investigative procedure.
‘While the Indian Government may harp only on the positives in the FATF’s report on India, they can’t conveniently downplay how they have been rapped for their partial compliance with measures to protect the legitimate activities of the non-profit sector,‘ said Aakar Patel, chair of board at Amnesty International India.
FCRA provisions weaponised: legal process is the punishment
The Indian government for past few years, has been clamping down heavily on foreign funding for thousands of civil society groups with the help of FCRA provisions. The home ministry, which regulates the non-profit sector, has also made applying for a licence much harder. Over 20,600 non-governmental organisations have lost their licenses to receive any foreign funding in past 10 years. A number among these groups have been working for human rights for decades.
The first highlight of the report puts light on country’s Income Tax department’s failure in demonstrating that the 7500 non-profit organisations which it has been monitoring, are validly at risk of terrorism financing abuse.
The first highlight of the report puts light on country’s Income Tax department’s failure in demonstrating that the 7500 non-profit organisations which it has been monitoring, are validly at risk of terrorism financing abuse. Secondly, Non-profits in India are required to go through a process of burdensome registration and audit requirements that are not ‘always risk-based or implemented based on consultations with [them] to avoid negatively impacting their work‘.
Thirdly, FATF notes that amendments made to the Foreign Contribution (Regulation) Act (FCRA) in 2020 were done by the current regime in a way which did not took into consideration the challenges faced by non-profits, neither it did adequate consultation with them.
In addition to that, the report also notes the significant delays that has become almost a norm in cases of prosecution under Unlawful Activities (Prevention) Act (UAPA) and Prevention of Money Laundering Act (PMLA). This legal logjam is generating a pile of pending cases causing the accused persons to stay in judicial custody over longer periods while the cases have yet to be tried and concluded. The report acknowledges that such delays can be a signifier of the possibility that these laws are susceptible for misuse against the civil rights groups and those who are critical of the regime and its various policies.
The tedious legal process ensures that the criminal prosecution helped by stringent bail provisions, prolonged detention, and lengthy investigation, itself becomes the punishment.
Attack on civil society and non-ptofit sector under the garb of fighting against corruption
Since Narendra Modi came into office, the non-profit sector in the country is functioning in an ‘environment of fear,’ according to industry veterans. Since 2014, the Modi government has closed on thousands of charities and dried other sources. However, the most often wielded tool by the government is the Foreign Contribution Regulation Act (FCRA). The law was enacted in 1976 in the geopolitical rivalry of Cold War to give the Indian government the rights to limit any foreign interference in India’s affairs, hence it gave it the powers to deny NGOs all foreign funding.
The major target of this attack are the organisations Modi-led BJP thinks to be its ideological opponents. This is a broad category which includes independent media houses to human rights groups. Amnesty International, an NGO known for investigating into atrocities by Hindutva right, is a clear example here. It had to close its operations in India in the year 2020 after the government had frozen its funds in a money-laundering case.
India has witnessed a number of instance in previous years when the members from civil society and organisation working for press freedom, human rights advocates and minority rights activists have been abused in the name of combating black money and foreign funding. In February this year, Income Tax and Delhi Police officials raided the premises of BBC in the country’s capital saying that an income tax survey was being conducted as the officials entered the building, confiscated the phones of journalists, and begun a search of their computers.
India has witnessed a number of instance in previous years when the members from civil society and organisation working for press freedom, human rights advocates and minority rights activists have been abused in the name of combating black money and foreign funding.
Not to forget that the so-called survey was happening barely weeks after the BBC had aired a documentary on Indian Prime Minister Narendra Modi’s role in the 2002 Gujarat pogroms as titled India: The Modi Question. The IT department did not release any press statements explaining why a sudden IT survey was being conducted on a media agency. It was reported in media via “sources” that the BBC were being investigated over, ‘deliberate non-compliance with Indian laws including transfer pricing rules and diversion of profits illegally.’
Dried foreign funding: strenuous effect on non-profit sector
Given the dependence of many of these NGOs on foreign money, the curb on funding has proven to be crushing for the Non-profit sector. According to a survey by Sattva Consulting, an advisory outfit, nearly half of the 200 big NGOs are dependent on donations coming from overseas for more than half their income. Organisations working in policy and research are even more reliant. Around 75% funding of Centre for Policy Research (CPR) was from overseas.
Human Rights group Amnesty International has shown through its research how Indian authorities have abused FATF’s recommendations which includes adopting the harsh provisions under various draconian laws in a caricatured way to stifle the non-profit sector. These provisions have become an effective mechanism to stop organisations and activists from accessing essential funds.
‘Amnesty International has consistently flagged how these laws have been weaponized by authorities to target, intimidate, harass and silence critics. In consultation with the non-profit sector, the government needs to put in place measures that are focused, proportionate and not overbroad by bringing laws like FCRA and UAPA in line with international human rights standards. The Indian Government must take seriously the priority actions recommended by the FATF report and calibrate its actions with a risk-based approach to stop the witch-hunt under India’s anti-terror and money-laundering laws of non-profit organizations, human rights defenders and activists who dare to dissent,‘ said Aakar Patel.
The international watchdog’s report has proposed the ‘Priority Actions‘ detailing how the country needs to adopt a risk-based approach which would require conducting a careful and coordinated outreach to non-profit organisations on the risks of Terrorism Financing. FATF emphasises on the need to address the significant delays in trials and prosecution under UAPA and PMLA given that the country has seen a sharp spike in arrests over the past few years while the conviction rate falls way below, under these laws.
