In a report, the IMF appreciated New Delhi’s efforts to tackle the twin problems but raised concerns over the absence of convictions for money laundering.
The report drawn on July 2010 was released on Monday.
“As a leader among the emerging economies in Asia with a strongly growing economy and demography, India faces a range of money laundering and terrorist financing risks,” it said.
“The main sources of money laundering in India result from a range of illegal activities committed within and outside the country, mainly drug trafficking; fraud; counterfeiting of Indian currency; trans-national organised crime; human trafficking; and corruption,” the IMF report added.
It said India “continues to be a significant target for terrorist groups and has been the victim of numerous attacks” and added that there were “no published figures of terrorist cells operating in the country”.
The report said India had increased its focus on money laundering since mid-2009, but some legal impediments, such as the threshold condition for domestic offences, were yet to be resolved.
The report recommended that India enhance the effectiveness of its financial sector supervisory regime.