Money laundering is a menace to economies and a central concern globally. The financial system remains the primary target of money launderers. While the risk of money laundering cannot be entirely eliminated, it can be mitigated through specific preventative measures. In this regard, FATF took its initial international step by presenting its 40 recommendations to combat Money Laundering and Terrorist Financing. These recommendations have since evolved into a model for successful national and global Anti Money Laundering and Countering Financing of Terrorism (AML/CFT) controls. This paper aims to assess and describe the anti-money laundering (AML) practice and framework within the Indian financial system, as well as to examine how the Indian financial system has addressed FATF's recommendations on AML. The study utilizes secondary data obtained from books, annual reports, and selected websites to achieve its objectives. The findings of the study demonstrate that the Anti-Money Laundering (AML) regime in the Indian financial system is regulated by the Prevention of Money Laundering Act (PMLA) along with an established regulatory and supervisory framework to address FATF Recommendations. The AML framework of the Indian financial system includes FIU-India, which operates as a national agency for receiving, processing, analyzing, and disseminating information related to suspicious transactions. Additionally, the Reserve Bank of India (RBI), Securities Exchange Board of India (SEBI), and Insurance Regulatory Development Authority (IRDA) serve as the regulatory and supervisory bodies for financial institutions in India. Regulating, supervising, and developing Anti-Money Laundering (AML) policies and practices for the Indian financial sector fall under the responsibilities of these three authorities.