India's gems and jewellery sector has been identified as highly vulnerable to money laundering and terrorist financing activities, according to a new report by the Financial Action Task Force (FATF). The Paris-based global watchdog highlighted the ease with which large sums of money can be transferred through the trade of precious metals and stones, often without leaving a clear ownership trail.

In its mutual evaluation report for India, released on Thursday, the FATF emphasized that the risks associated with smuggling and trading in these valuable commodities require closer scrutiny, particularly given the sector's significant size in the country.

The report revealed that India has approximately 175,000 dealers of precious metals and stones (DPMS). However, the sector's regulatory body, the Gems and Jewellery Export Promotion Council (GJEPC), only accounts for around 9,500 registered members, raising concerns about the lack of oversight for the vast majority of the industry.

The FATF urged Indian authorities to further assess and mitigate these risks to better safeguard the sector from illicit financial activities.