RBI Prohibits FDI in Non-Cooperative Countries

RBI Prohibits FDI in Non-Cooperative Countries

The Reserve Bank of India has prohibited the Indian entities on January 25, 2017 from making direct overseas investments in any entity that is located in ‘non co-operative countries and territories’, as identified by the inter-governmental body Financial Action Task Force (FATF). The move aims to bring

down the global terror financing and thus prevent, detect and prohibit money laundering. At present, there is no restriction on an Indian entity regarding the countries where it can undertake Overseas Direct Investment. The prohibition aims to align with the instructions under FEMA with the objectives of the FATF.

Financial Action Task Force (FATF) 

 FATF was established in 1989 to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.

FATF currently comprises two regional organisations and 35 member jurisdictions, including India, US, UK, China and the European Commission.