SOUTH ASIA INTELLIGENCE REVIEW
Weekly Assessments & Briefings
Volume 1, No. 17, November 11, 2002

J&K: Losing the War against Terrorist Financing?
Kanchan L
Research Associate, Institute for Conflict Management

The United Nations Security Council Resolution 1373, proclaims: "…all States should prevent and suppress the financing of terrorism, as well as criminalize the wilful provision or collection of funds for such acts." India is a strong supporter of this resolution, and has long and loudly protested the regime of international tolerance (and occasional support) that has allowed front organisations of terrorist groups operating in India to mobilise funds in other parts of the world, and to transfer these through elaborate financial mechanisms, instrumentalities and intermediaries, to the final perpetrators of terror in the field. Ironically, within India, there appears to be little political will to destroy the financial support structures of terrorism. This was particularly in evidence in the announcement by the new People's Democratic Party (PDP) - Indian National Congress (INC) coalition in the terror afflicted State of Jammu and Kashmir (J&K), headed by Mufti Mohammed Sayeed, that it would not implement the Prevention of Terrorism Act, 2002 (POTA) in the State. POTA is the only instrument that criminalizes the mobilisation and transfer of financial resources to terrorists in India.

International hawala (trust) transactions lie at the heart of the web of terrorist financing - as of a wide range of organised criminal and illegal business operations - and constitute a reliable option that almost leaves no paper trail, and escapes conventional detection mechanisms, even as it transfers large quantities of funds across the globe in a matter of hours.

India has among the weakest and most licentious regimes in the world for the control of financial crimes. Under the Foreign Exchange Management Act, 1999, hawala is only a civil offence and persons violating its provisions can be penalised with fine up to three times the amount detected in a contravention. Prosecution under FEMA is complex, as foreign exchange violations, unlike other crimes enumerated under purview of the Criminal Procedure Code (CrPC), do not leave a trail of evidence, especially in hawala cases. Evidence collected is more often than not inadmissible under the prevailing legal system; inordinate delays in prosecution (the litigation process often takes decades before a final determination) lead to disappearance of material witnesses as also the tampering of evidence; in the rare case of eventual conviction, the penalties applied seldom explore even the available upper limit under the law.

Section 22 of POTA was intended to provide for a harsher process and penalties in cases of fund raising for a terrorist organisation. Such activities are treated as a criminal offence and a person found guilty under this Section is liable, on conviction, to imprisonment for a term of up to 14 years, or fine or both. This gave teeth to enforcement agencies charged with meeting the mounting challenge of terrorism, though the task is still far from simple: investigators have to prove that the money secured through hawala routes did actually finance or was used in a particular terrorist incident or operation. Hawala conduits and certain secessionist leaders in J&K have in the recent past escaped prosecution as a result of the problems of demonstrating such 'end use'.

Nevertheless, there have been a substantial number of recoveries and arrests in such transactions in J&K in the post-9/11 period. On December 6, 2001, the arrest of Abdul Rashid Lone, 'group commander' of the Hizb-ul-Mujahideen (HM) in the Baramulla area, led to recovery of Rs. Four million. On the same day, Abdul Rehman Sofi alias Rehman Lala and Mohammed Shabban Khan were arrested in Delhi returning from a meeting with HM chief Syed Salahuddin in Pakistan. Their confessions led to the recovery of Rs. 1.5 million received through hawala for distribution to the HM, Lashkar-e-Toiba (LeT) and Jaish-e-Mohammed (JeM). On December 13, 2001, the killing of Nazir Ahmad Yattoo, alias Shakir Ghaznavi, HM 'divisional commander' (who was also looking after the distribution of finances), in an encounter with security forces at Pattan in Baramulla district, was followed by the recovery of Rs. 3.2 million. On January 14, 2002, the arrest of four Kashmiris linked to the LeT at Delhi led to the recovery of Rs. 3.49 million, which they had received through hawala on behalf of the South Kashmir Valley 'commander' of the Lashkar. The four, according to official sources, had arrived at the capital with plans to cause explosions at crowded places and disrupt normal life in the run-up to the Republic Day Parade on January 26. Another Rs. 460,000 was recovered from a Delhi-based Hawala operator who had provided the money to the Lashkar activists.

On March 24, 2002, the arrest of Shamima Khan, a Srinagar-based Jammu and Kashmir Liberation Front (JKLF) activist, at Kud on the Jammu-Srinagar national highway was followed by recovery of Rs. 4.8 million meant for Yasin Malik, Chairman of the JKLF. Khan revealed during interrogation that she had received the money from a Hurriyat activist, Altaf Qadiri, at a hotel in the Bagh Bazaar area of Kathmandu in Nepal. Subsequently, the arrest on May 22, 2002, of Imtiyaz Ahmed Bazaz, a Srinagar-based journalist, led to the unravelling of an elaborate hawala network. Bazaz is reported to have worked as a conduit for the flow of finances from the London-based physicist Dr. Ayub Thokar, President of the World Kashmir Freedom Movement, to Asiya Indrabi, chief of Dukhtaraan-e-Millat (DeM) and Syed Ali Shah Geelani, a former chairman of the secessionist All Parties Hurriyat Conference (APHC). Consequently, Geelani was arrested on June 9 under POTA and shifted to the Ranchi central Jail in Jharkhand State, on charges of receiving money from Pakistan's Inter Services Intelligence (ISI) through hawala channels and later distributing the same to different terrorist groups, including the HM. Bazaz is reported to have confessed that HM chief Salahuddin, had been sending money to his local 'commanders' through Thokar and Geelani. Moreover, as Indirabi's husband Qasim Faktu was 'financial chief' of Jamiat-ul-Mujahideen (JuM), she also received money from Thokar through Bazaz to provide finances to JuM as well as DeM.

While action against Thokar and his London charity, Mercy International, has been initiated at the highest level by the British Government, the recipients of many such hawala transactions traced to Thokar are slated to go free and unpunished, courtesy the Mufti government's unwillingness to allow prosecutions under POTA, the only available statute that could bring them to book. Latest reports from the State indicate that the Mufti regime is contemplating the release of Geelani and Yasin Malik. Such action could only sustain and strengthen the increasingly invisible sources of the finance of terrorism.

The convergence of invisible transfers and the secessionist terrorist movement in J&K is discernible in the fact that the APHC, according to official estimates, spends approximately Rs. 15 to 20 million per month on its various organisational expenses. It is not a registered organisation and does not file any income tax returns. Furthermore, there is no local fund collection by the Hurriyat, and the predominant proportion of the APHC's funding can either directly or indirectly be traced to the ISI. Individual constituents of the APHC also independently secure funds through sister organisations in Pakistan and Pakistan occupied Kashmir (PoK), such as the Jamaat-e-Islami, Muslim Conference, Jamiat Ahle Hadis, People's League, etc. The individual constituents also get funds through expatriate Kashmiri organizations like Thokar's World Kashmir Freedom Movement, Nazir Qureshi's World Assembly of Muslim Youth in Saudi Arabia, etc. The JKLF, an important Hurriyat constituent, receives funds through its branches in a few countries, including Saudi Arabia, UAE, Qatar, Kuwait, USA and UK. Income Tax (IT) Department investigations into Geelani's transactions have revealed that the monthly personal expenditure at his residence was more than Rs 150,000 against his declared annual income of Rs 17,100. IT returns filed by Geelani indicate that he was getting Rs 7,100 as pension for being a former member of the State Legislative Assembly and Rs 10,000 as agriculture income, which works out to less than Rs 1,500 per month.

The intricate hawala network, according to official estimates, profits every conceivable terrorist and secessionist group in the State. Indeed, senior police officials claim that militancy in the State has emerged as a highly lucrative 'industry' for several thousand families. Apart from the major groups, cadres of a number of lesser known organisations that have mushroomed in the extremist milieu that is J&K today, have also cornered shares in the substantial illicit financial flows. Thus, Yaqoob Vakil who was arrested on June 20, 2002, confessed to having provided finances (Rs. 1.5 million during 2001 and Rs. 2.0 million in 2002) to Valley-based Al Umar Mujahideen cadres at the behest of the outfit's chief, Mushtaq Ahmed Zargar, one of the three terrorists released to end the seven-day hijacking of the Indian airlines aircraft in Kandahar (southern Afghanistan) in December 1999. On June 29, 2002, security agencies neutralized a Tehrik-ul-Mujahideen channel, operating through Bashir Ahmed Sofi, Inayat Ali, and Mehraj-ud-Din Bhat, through which Rs. 10 million crore had been transferred to the Tehrik. Yet another Tehrik channel came to light with the arrest on July 22, 2002, of Shaukat Ahmed Shah, chief of Jamaat-Ahle-Hadis, J&K, and an ideologue of the Tehrik-ul-Mujahideen, on charges of routing funds to the tune of Rs. 4.0 million to the terrorist group. On August 2, 2002, Abdul Rashid Bhat was arrested with a consignment of Rs. 1.0 million while attempting to pass funds on to the Al Badr group (he had earlier channelised two transactions worth Rs. 800,000).

Many J&K-based doctors, engineers, technicians and certain business houses working in the Gulf and engaged in the provision of various services, or export of goods, such as carpets and handicrafts, have diverted funds through hawala operators to finance militants and secessionist leaders. Among one of the currently popular modes of hawala transfer is the movement of money through small-scale businessmen, such as shawl vendors. Although individual amounts involved in these transactions are small, very large numbers of such transactions result in transfers of great magnitude.

The ease with which transfers take place is visible, not only in the free availability of resources to all terrorist groups operating in J&K and other parts of the country, but also in the movement of such funds into the bank accounts of terrorists like the 9/11 hijacker, Mohammed Atta through JeM terrorist Omar Sheikh, with no paper evidence left behind. The arrest of Aftab Ansari alias Farhan Malik, a Dubai-based Mafiosi, for his role in the January 22, 2002, terrorist attack on the American Centre in Kolkata revealed that he had masterminded the abduction of Kolkata-based businessman Parthapratim Roy Burman and extracted a ransom of $815,000 via Dubai through hawala. Omar Sheikh had reportedly wired $100,000 to Mohammed Atta out of this money.

The largest flow of money towards terrorist groups is through hawala transactions routed through the Gulf region. The scenario has been rather dismal for Indian enforcement agencies vis-à-vis Dubai, the hub of the hawala racket, along with Pakistan. Lack of laws that explicitly prohibit hawala, and the fact that Dubai is a free trade zone, have not only led to complexities in curbing the practice, but also to a very low priority ascribed to such activities by the enforcement agencies in that country. A substantial proportion of finances for Islamist terrorist groups active in J&K and elsewhere, is also routed through the Pakistan High Commission in New Delhi. The other routes of money transfer are through Nepal and Bangladesh, as also through infiltrating groups directly crossing the Line of Control (LoC) and the International Border from Pakistan.

Confronting this intricate web which provides terrorist operations across the world with the wherewithal to act, and which is substantially supported by both organised crime networks and by a number of state sponsors of terrorism, as well as by several state agencies in countries that are sympathetic to the Islamist extremist cause, is an enormous challenge. This is the case even where an efficient legislative, investigative and judicial mechanism is in place. Where the legitimacy of every legal instrument to bring the problem under control is itself undermined by the political executive - as is the present case in J&K - and where the judicial process is marked, not only by extraordinary sluggishness, but by frequent and active hostility against the investigative and prosecuting agencies, the prospects of defeating terrorism and re-establishing the rule of law are minimal.