FATF Report: India Bolsters Cybersecurity and Crypto Regulations to Address Escalating Threats, Says CNBC TV18
India has taken steps to strengthen its defences against cybercrime and improve the regulation of virtual assets based on a recent report by the Financial Action Task Force (FATF).
The report underscores the challenges posed by cyber-enabled fraud and the complexities surrounding cryptocurrency, highlighting the importance of robust cybersecurity frameworks and strict compliance for Virtual Asset Service Providers (VASPs).
The Indian Cybercrime Coordination Centre (I4C), established in 2020, is leading this effort by developing advanced forensic and technological tools to assist law enforcement agencies (LEAs). The I4C aims to generate comprehensive cybercrime threat intelligence reports and facilitate the reporting of cyber incidents using cutting-edge digital technologies for forensic analysis.
Financial institutions across the country are enhancing their cybersecurity measures by utilizing technologies like geofencing, machine learning models, and scoring algorithms to monitor and mitigate potential risks.
India’s cybersecurity watchdog, the Computer Emergency Response Team (CERT-IN), plays a critical role in responding to cybersecurity incidents and bolstering the security of India’s communication and information infrastructure.
In tandem with cybersecurity initiatives, the regulation of virtual assets has gained traction. VASPs were designated as reporting entities under the Prevention of Money-Laundering Act (PMLA) in February 2023. The Financial Intelligence Unit of India (FIU-IND) provided detailed guidance in March 2023 and developed Red Flag Indicators for VASPs in April 2023.
VASPs are now required to register and comply with anti-money laundering (AML) and counter-terrorist financing (CFT) obligations, including thorough customer due diligence (CDD) and reporting of suspicious transactions. They are also implementing technological solutions to adhere to the “travel rule,” which mandates sharing information on virtual asset transfers’ originator and beneficiary.
Despite these advancements, VASPs face challenges such as counterparty identification, interoperability between travel rule providers, and differing data protection laws. To address these challenges, enhanced controls like video KYC processes and rigorous transaction monitoring are being implemented, especially for high-risk clients.
The report also highlights risks associated with virtual assets, including anonymity, compliance weaknesses, and the growing prevalence of scams and ransomware. There is a concerning rise in cases linking virtual assets to terrorism financing.
Recognizing the global nature of these threats, the report emphasizes the importance of international cooperation in combating money laundering and terrorist financing related to virtual assets. India is positioned to exchange critical information with international counterparts through channels like the Egmont Group and other networks.
As India continues to address cybersecurity and cryptocurrency regulation complexities, these measures are crucial for safeguarding the financial system’s integrity and meeting international standards.
Also read: FATF India Mutual Evaluation Report | Why this marks the successful completion of a long journey
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