Terrorist financing is, in many ways, a vastly overrated and sensationalized issue, particularly in the Indian context. The truth is that the funding required for supporting major terrorist attacks, or even sustained campaigns of terrorism, is so small that it constitutes no more than a marginal challenge for entities engaged in, or agencies supporting, terrorism. This is particularly the case when terrorist organizations are integrated or associated with vast charitable complexes engaged in a multiplicity of entirely legitimate activities, or when they constitute part of a state or quasi-state enterprise – as is the case with most Islamist terrorist groups operating against India out of Pakistan. It is even more the case when terrorist finances constitute a minuscule proportion of a vast and undocumented black economy, in circumstances where extreme infirmity and confusion characterizes the operation of a multiplicity of monitoring agencies tasked with financial intelligence and enforcement, as is, again, the case in India.
Theoretically, of course, targeting the financial apparatus and transactions relating to terrorist movements or incidents can be an immensely powerful counter-terrorism tool. It is significant that, once the Liberation Tigers of Tamil Eelam (LTTE) was proscribed by the US and European Community, its resource flows quickly dried up, and this had decisive impact on LTTE capabilities in Sri Lanka. For South Asia, however, this would be a unique case, since the LTTE’s finances relied overwhelmingly on Sri Lankan Tamil Diaspora contributions (harvested voluntarily or coercively), and on a range of legal and illegal enterprises run by LTTE fronts, principally in countries that came under the ban. The potential of the third source, ‘taxation’ on local populations in LTTE-dominated areas in Sri Lanka, diminished rapidly once the war escalated. Curtailing foreign flows was possible, moreover, only because of the extraordinary transparency and detailed documentation of all transactions in the West, rendering contributions to a proscribed organization, or any of its fronts, fraught with severe consequences.
After 9/11, the US enormously emphasized and targeted terrorist finance, with President George Bush declaring, "Money is the lifeblood of terrorist operations… we have launched a strike on the financial foundation of the global terror network." Investigations into the financing of 9/11 provided crucial evidence against the conspirators and their support networks. The resulting freezing of bank accounts and assets of associated entities secured quick successes. By September 2003, 1,439 accounts, containing over 136.7 million, were frozen worldwide. However, terrorist groups adapted quickly and "a drastic fall in the volumes of money frozen worldwide" was registered thereafter, even as Osama bin Laden boasted openly that US efforts would not make any difference because "by the grace of God, al Qaeda has more than three different alternative financial networks."
Any effort to try to replicate the Western approach (however limited its successes) to terrorist finances in India would, however, be utterly misconceived. This is brought out dramatically by the fact that Dawood Ibrahim, the architect of the devastating 1993 Mumbai serial blasts (the largest terrorist attack in the country, with 257 fatalities), still controls one of the most comprehensive organized crime networks in Mumbai, a decade and a half later, with deep collusive roots among elements of Maharashtra’s political leadership. In the meanwhile, the ‘D’ Company has become a major Inter-Services Intelligence (ISI) asset and a continuous collaborator with the Lashkar-e-Taiba (LeT) and other Pakistan-backed terrorist groups, facilitating the movement of arms and explosives, as well as of finances, across international boundaries.
It is useful, in this context, to briefly examine the sheer multiplicity of sources finance for Islamist terrorist groups operating in India, and the near impossibility of effectively targeting these networks.
The first and most significant source of terrorist finance is the Pakistani state and its agencies. Apart from very substantial freedom of operation that the Pakistan Government offers to an entire range of state-supported terrorist organizations on Pakistani soil, the Government is directly engaged in providing resources to these groups. Every terrorist who crosses over the Line of Control brings a certain quantum of funds with him, and is promised substantial rewards on the successful completion of his ‘mission’, as well as liberal compensation to his family in the event of death. Terrorist and subversive networks on Indian soil receive sizeable infusions on a regular basis through a number of overground front organizations, dubious charities, hawala transfers and, in some particularly blatant cases, through Pakistani diplomatic missions. Thus, in February 2003, India expelled Pakistan’s Charge d’Affaires Jalil Abbas Jilani and four staff members of the High Commission at Delhi after two Hurriyat activists were arrested with INR 500,000, allegedly meant for Kashmiri terrorists, immediately after they came out of the High Commission. Indeed, the All Party Hurriyat Conference (APHC) had long been used to channel funds from Pakistan to terrorists in J&K, and, Praveen Swami notes, as early as 1997, top APHC leaders Abdul Gani Lone and Syed Ali Shah Geelani "had received funding to the tune of several million Indian Rupees a month from Pakistan, often ostensibly gathered by shadow charities, and sent to them through Hawala traders." Significantly, Income Tax Department investigations into Geelani’s transactions estimated that the monthly expenditure at his residence was more than INR 150,000, against a declared annual income in 2003 of just INR 17,000.
Earlier, 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 the recovery of INR 4.8 million meant for Yasin Malik, JKLF Chairman. Khan reportedly received the money from an APHC activist, Altaf Qadiri, at Kathmandu in Nepal.
Similarly, the arrest on May 22, 2002, of Imtiyaz Ahmed Bazaz, a Srinagar-based journalist, led to the unravelling of an elaborate Hawala network. Bazaz reportedly worked as a conduit for the flow of finances from the London-based physicist Dr. Ayub Thokar, President of World Kashmir Freedom Movement, to Asiya Andrabi, chief of Dukhtaraan-e-Millat and Syed Ali Shah Geelani of the APHC. Bazaz also have confessed that Hizb-ul-Mujahiddeen chief Syed Salahuddin, had been sending money to his local ‘commanders’ through Thokor and Geelani.
Money is also transferred through travelers from Pakistan to India, particularly on the bi-weekly Express Train that shuttles between Munabao in Barmer, Rajasthan, and Khokhrapar in Sindh, Pakistan, and the Samjhauta Express across the Attari border. There have also been occasional arrests of passengers carrying substantial sums for terrorists on the Srinagar-Muzzafarabad ‘Karvan-e-Aman’ bus. Thus, on May 12, 2008, a passenger from Pakistan Occupied Kashmir (PoK) was detained by the Army when he was handing over INR 150,000 to a ‘contact’, who the Army claimed was deputed by a militant group active in Sopore.
One of the most visible indices of Pakistani state support to terrorism in India comes from the vast quantities of counterfeit currency that is printed in Pakistani Security Presses at the Mlair Cantonment in Karachi, and at Lahore, Quetta and Peshawar. This counterfeit currency has been among the most significant tools of state finance of terrorism, and has also enabled the Pakistan Army to keep its expenditure on these activities outside its official budget. While no hard estimate of the actual quantities of counterfeit currency that is pumped into the Indian economy by Pakistan is available, intelligence assessments suggest that approximately INR 120 million to INR 130 million are smuggled in annually through a number of clandestine channels. Some estimates suggest that as much as 25 per cent of the total currency in circulation in India could be fake.
While some of this counterfeit currency is brought in by terrorists who infiltrate India’s various borders – across the Line of Control, along the Western border, through the sea route, from Bangladesh and from Nepal – a significant quantity is moved about through criminal networks, principally those controlled by the ‘D’ Company. The fake notes are transported to Dubai, Kathmandu, Bangkok, Dhaka and Singapore, from where they are then physically smuggled into India by a range of couriers – including Indian workers traveling home – as well as on smuggling boats and by ‘D’ company operatives through select airlines. The overwhelming proportion of this currency first lands in Maharashtra, where the ‘D’ Company is most influential, or is pushed through Bangladesh, Nepal and Thailand. Nepal has, indeed, made the possession of large denomination Indian currencies (INR 500 and INR 1,000 notes) illegal, as a result. While some of this money reaches the terrorists in J&K, according to the Directorate of Revenue Intelligence, a large proportion is "distributed among criminals and smugglers in different parts of the country, mostly New Delhi, Mumbai, Hyderabad, Lucknow, etc., as the ISI also used the services of these criminals occasionally to transport weaponry and explosive devices." Counterfeit currency transactions are quite profitable for criminals. The DRI notes,
Money is also raised by terrorist groups and their front organizations, as well as their political affiliates, in Pakistan, often directly to fund the jihad, but more comprehensively and routinely, towards the various religious charities these groups also run. Part of the money received for charitable works is skimmed off to fund terrorist infrastructure and operations. These organizations also receive substantial contributions from international Islamic charities and foreign sympathizers. Among the prominent charities, non-governmental agencies and political formations across the world that are believed to have funded various terrorist organizations are the World Assembly of Muslim Youth; the International Islamic Federation of Students’ Organisations; al Haramain foundation; the International Islamic Relief Organisation; the Global Relief Foundation; al Rabita Trust; al Rashid Trust; the World Kashmir Freedom Movement; the Consultative Committee of Indian Muslims; and, in Pakistan, the Jamaat-e-Islami, the Muslim Conference, the Jamiat-e-Ahl-e-Hadis and the People’s League, among others.
Terrorist fronts in Pakistan also raise some revenues from various investments in business ventures – including reportedly substantial transactions in the one-time booming Indian stock market. The narcotics trade, weapons’ smuggling and extortion are additional sources of revenue generation.
The principal sources of revenue generation for Islamist terrorists in India, consequently, lie outside the country, though a small proportion – estimated by intelligence sources at no more than 10 per cent of total revenues – may be generated through donations, extortion and business activities in India. With a bulk of sources located in Pakistan, and protected by Pakistan state agencies, and others located in a number of countries, particularly in West Asia, which have a poor record of counter-terrorism cooperation with India, Indian agencies have limited capacities to attack terrorist funding at the point of resource generation. The core challenge of tackling terrorist finance is, consequently, limited to the receipt and distribution of funds. The overwhelming proportion of such transfers occur through informal hawala channels, though forged accounts and some highly opaque transactions through the legal banking and wire transfer system also play an occasional part.
Most cases registered in connection with terrorist finance in India have been related to the possession of unexplained monies by individuals linked to terrorist groups or their front organizations, and the charge of supporting terrorism is seldom established. Thus, for instance, Tariq Ahmed Dar, who was arrested in November 2005 for links to the October 29, 2005, serial bombings in Delhi, confessed before a Delhi Court that he had transferred hawala money to LeT terrorists involved in the blasts, and also that he had called up news agencies to deny the Lashkar’s role in the explosions on a cell phone ‘gifted’ to him by Lashkar operatives, but flatly denied that he had any role in the explosions. While technical evidence linked him to these lesser crimes, there was little possibility of proving his role in the more sinister conspiracy.
Within the Indian context, tackling the problem of terrorist finance is compounded infinitely by the intertwining of terrorist and organised criminal financial operations with the underbelly of otherwise legitimate commercial and financial activities. The reality is that an overwhelming proportion of organised crime and underground (including terrorist) financial operations, today, are not predatory but collusive – based on a continuing and symbiotic relationship of acquiescence between criminal enterprises on the one hand and, on the other, government agencies and officials, as well as enterprises whose primary businesses lie within the ambit of the law. It is the vast black economy in India that provides the context of the movement of funds by terrorists as well. Hawala networks are not only used by terrorists, drug-traffickers, arms smugglers and other criminals, but also by corrupt businessmen, bureaucrats and politicians, as well as by expatriate workers transferring monies to their families at home.
Terrorists constantly reinvent their modus operandi to protect their funding networks, and a sluggish bureaucracy has failed to keep up with the tasks of interdiction. The problem is compounded infinitely by the fact that India has no integrated apparatus for financial intelligence and enforcement. There are, for instance, as many as 15 central agencies variously charged with gathering financial intelligence, with or without an enforcement responsibility, and a large number of other organisations charged with the task of collection, collation and analysis of financial data, and little coordination between them. The absence of transparency across the market; a seamless blending of corporate and criminal cultures; a permissive, even licentious, operating environment; and the diffusion of function and responsibility among the multiplicity of enforcement agencies, make it nigh impossible to effectively contain or neutralize the complex networks of illegal financial traffic in India. Crucially, terrorist finance cannot be contained unless all illegal financial operations are disabled – an objective that is far from acceptable to the compromised political and bureaucratic leadership of the country. Successes in disrupting terrorist funding networks in India will, consequently, remain episodic at best, and will have no more than marginal impact on the larger counter-terrorism endeavour.
Published in Defence & Security of India, April 2009