Like the global nuclear power club, India is set to join the anti-money laundering syndicate - Financial Action Task Force - later this year, which will help local banks access developed country markets more easily.
Until recently, the United States was denying ICICI Bank, Bank of Baroda and State Bank of India branch licences on the grounds that India was not a member of the FATF. These banks managed to win a temporary reprieve after the government and the Reserve Bank of India withheld fresh branch permission to the likes of Citibank.
But sources involved in the negotiations with FATF said that India has completed all but one formality - to amend the Prevention of Money Launder Act - to include a host of offenses, such as insider trading and human trafficking, in the schedule of offences.
"This was an oversight that will soon be taken care of," an official said. The Bill to amend the PMLA is expected to be placed in Parliament next month and the government will be able to share the provisions of the proposed law and win a membership.
The sources said that the other six major prerequisites for a membership have already been put in place. For instance, the FATF - that has 35 members, with India being an observer - wanted the government to establish a trail of all foreign exchange transactions, including hawala.
While the RBI has put in place a trail by asking agents, including those for wire transfer, to maintain records for a specified period of time, it managed to convince FATF that hawala deals could not be tracked as such transactions were illegal.
The other five commandments have already been complied with since the government last year notified changes to the rules related to the PMLA, specifying that suspected cases of terror financing would be part of the suspicious transaction reporting system.
The other four specifications were in place as soon as the PMLA came into effect. They included naming of enforcement agencies to deal with the notified laws and mandating 'know your client' norms that would be legally binding.
The establishment of the Financial Intelligence Unit (FIU-Ind) two years ago was also part of the exercise to gain a membership of the elite group.
