By Sachin Shah, Tata Consultancy Services
February 11, 2023
A closer look at India’s foreign policy and its evolution over the years sheds light on India’s non-aligned sanctions compliance regime.
India has two types of sanctions regimes. One is trade and economic sanctions; the other is sovereign sanctions related to India’s peace, security and integrity. The trade sanctions regime is governed by foreign trade policy and the sovereign sanctions regime by the Unlawful Activities Prevention Act (UAPA), enacted in 1967.
The rationale for India not having any unilateral sanctions regime lies in its deep-rooted culture of global peace and harmony, also reflected in its foreign policy. Post-independence, India has been keen to maintain its sovereignty and is assertive in marking its own space.
Unlike the superpower countries that use sanctions as a tool to respond to significant geopolitical challenges, India looks inward, trying to attain political and economic self-reliance to tackle internal conflicts and threats.
UAPA’s Framework Part of Triage
UAPA is the outcome of the efforts and challenges faced in the unification of India and its princely states – a pain point even in today’s Indian geopolitical landscape. The act mitigates geopolitical risks.
UAPA comes under the direct ambit of the Ministry of Home Affairs (MHA), which is entrusted with preserving internal security. The National Investigation Agency (NIA) is responsible for implementing UAPA provisions and the 2019 amendment to UAPA, which gives additional powers to NIA to investigate and seize property related to unlawful activity.
UAPA provides the regulatory framework for defining unlawful activities. The framework has stringent reporting requirements and obligations for the regulated entities for further investigation and enforcement actions.
Chief considerations are “unlawful” and “terrorist activities” whose objective is the cession of part of the territory of India or the secession of a part of its territory from the unions that aim to disrupt India’s sovereignty and territorial integrity. Schedule I of the act mentions terrorist organizations and associations which the Government of India deems to be involved in unlawful activites including terrorism. It contains, apart from other names, two lists of individuals and entities suspected of having terrorist links, which are approved and periodically circulated by the United Nations Security Council (UNSC). These two lists are:
- the ISIL (Da’esh) & Al-Qaida sanctions list, associated names of individuals and entities; and
- the 1988 sanctions list, consisting of individuals and entities associated with the Taliban.
The Reserve Bank of India – Indian banks’ apex authority – has provisions that supplement UAPA in its Know Your Customer Master Direction (MD-KYC). This Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) regulation applies to all the regulated entities in India, including branches and subsidiaries of foreign-incorporated banks.
Apart from this regulatory framework and the sanctions list, regulated entities use the repository of crime and criminal information records for undertaking adverse media checks maintained by the National Crime Records Bureau.
This triage enhances the detection capabilities for the entities and the investigative agencies. The result is law and order and effective handling of internal and external threats to India’s peace, security and integrity.
Screening and Subsequent Action
Financial institutions embed the regulations and provisions in their AML/CFT policy and procedure documents and follow their implementation religiously. Compliance officers are well aware of these provisions and can screen customers against the list maintained under schedule I of UAPA, which lists 33 terrorist organizations.
Potential matches are brought to the attention of MHA and the Financial Intelligence Unit for further investigation and enforcement action. Although India does not have its own unilateral sanctions list like the US or EU, it acknowledges the UN’s list and regularly shares updates with financial institutions for screening.
The approach helps to avoid conflicts for the branches/subsidiaries of foreign incorporated banks mandated to follow local and global regulations. Hence, there is only an incremental list for screening, apart from schedule I of UAPA.
The question is whether this comparatively diminutive sanctions framework is effective. The answer is rooted in whether India’s sovereignty and territorial integrity have been protected and by measuring India’s role in global sanctions compliance.
Domestically, the effectiveness is evident in the containment of Naxalism – a term describing the country’s left-wing extremism. Also, the framework has helped restore peace and internal security in Jammu and Kashmir, which border Pakistan and where terrorism is most prevalent in India.
This is further supported by the high conviction rate of 94.7% of the cases under UAPA, as the Minister of State for Home stated in the upper house of the Indian Parliament. This conviction rate pertains to post-2020 cases (the figures that quantify the percentage have not been made public).
Non-Alignment Put to the Test
India’s non-aligned sanctions framework was strengthened due to Pokhran II, the country’s five nuclear bomb test explosions, in 1998. The tests led to sanctions by the United States and others.
All assistance except humanitarian aid was cut off. Exporting specific defense materials and technologies to India was banned; US credit and credit guarantees to India were stopped, and it opposed lending by international financial institutions.
The outcome was economic and military isolation. But India continued being self-reliant. It maintained that it had never proliferated any nuclear technology and that the nuclear tests were a legitimate defense need. International acceptance grew, and within 18 months, sanctions imposed on India were lifted.
Fast-forward to 2022. India displayed the same conviction when the Russian–Ukraine war broke out. India again maintained its glocal (global order in a local way) stand. This reflected India’s abiding by global views on world order, peace and harmony, but in its own way.
India gave a strong message that it is pursuing an ultra-realist foreign policy that deprioritizes its international affairs’ legal and moral aspects to secure national interests. The fact that no sanctions were imposed on India for the violation of Russian sanctions demonstrates the conviction and success of its non-aligned sanctions framework.
Non-Alignment is Distinct from Neutrality
India supports international efforts to target the bad actors who attempt to derail world peace and harmony while continuing to follow its sanctions policy. India’s non-alignment is distinct from neutrality. If India had taken a neutral stand, it would have cast a blind eye to the Russian invasion of Ukraine, showing complete insensitivity to an event that has global implications in terms of derailing peace.
However, India expressed its concerns about the Russian invasion and made diplomatic and political attempts to find a solution. The Indian prime minister tried to persuade both leaders to stop the war and abstained from voting in the United Nations on nearly every resolution condemning Russian aggression.
Neutrality and non-alignment might appear to have the same intent, and a non-aligned approach may be viewed as “fence-sitting,” as reported by the media. But it has led to India creating its own space in a multipolar world by asserting itself, upholding its rules and trying to help maintain international order and peace.
India has not changed its position on adopting unilateral sanctions. It has emerged strongly as a country demonstrating and communicating the effectiveness of its non-aligned sanctions framework and protecting its sovereign interest.
Sachin Shah is an ACSS Editorial Task Force member and senior domain consultant with one of India’s largest technology consulting firms, Tata Consultancy Services. Sachin specializes in the financial crime compliance domain with expertise in money laundering and sanctions compliance.