Choking funding to terrorism is a need of the hour

By Ashok Bhan, Senior Advocate and Geo-Strategic Expert-

-Effective method of counter-terrorism would be to launch a multidimensional offensive against funding, extortion, counterfeiting, fake charities, hawala and front companies

Ashok Bhan

Terrorist attacks are highly responsive to funding availability, and financial counter-terrorism can therefore be effective in reducing terrorism casualties, according to research conducted by Nicola Limodio, Assistant Professor of Finance at Bocconi University Visiting Fellow at the Economics Department and the Julis-Rabinowitz Center for Public Policy and Finance at Princeton University.

Everyone knows that terrorists need money and other assets, for weapons, training, travel and accommodation to plan and execute their attacks and develop an organization. Disrupting and preventing terrorist-related financial flows and transactions is one of the effective ways to fight terrorism. Not only can it prevent future attacks by disrupting their material support, but the footprint of their purchases, withdrawals and other financial transactions can also provide valuable information for ongoing investigations.

Without destroying the war economy in Kashmir, bringing peace to the troubled Indian state will remain a pipedream. Former Commandant of the BSF and researcher N S Jamwal estimates that Pakistan spends around $5 million annually (Rs 24 crore) to sustain militancy in Kashmir while India’s expenditure on counter-insurgency operations (CI-OPS) is around $1.46 billion annually (Rs. 730 crores). These figures are an indication of how every dollar spent on terrorist activities necessitates a financial commitment several orders of magnitude on counter-intelligence and physical expenditures in the target country. He is of the view that financing terrorism in J&K costs no more than US $70-80 million annually i.e., Rs 400-500 crore.

The need and importance for blocking finances to terrorist organizations were outlined and emphasized by Prime Minister Narendra Modi and the Home Minster recently while addressing a conference ‘No Money for Terror’ (NMFT) Ministerial Conference on Counter-Terrorism Financing in New Delhi recently. The two-day conference which was organized on 18th-19th November was a unique platform for participating nations and organizations to deliberate on the effectiveness of the current international regime on Counter Terrorism Financing and the steps required to address emerging challenges.

It was concluded in the conference that countering terrorism financing is an essential part of the global fight against the terror threat. As terrorists and terror groups continue to raise money with the use of various means, countries must make it a priority to understand the risks they face from terrorist financing and develop a policy response to all aspects of it.

-Dark face of terror

Modi recalled when the nation saw the dark face of terror long before the world took serious note of it. He added that even though thousands of precious lives were lost, India fought terrorism bravely. He said that the long-term impact of terrorism is particularly hard on the poor and on the local economy. “Be it tourism or trade, nobody likes an area that is constantly under threat”, Modi remarked. He further added that the livelihoods of people are snatched away as a result of terrorism. He pointed out that it is all the more important that we strike at the root of terror financing.

Sometimes there are indirect arguments made in support of terrorism to block action against terrorists. There is no place for an ambiguous approach while dealing with a global threat. “There is no good terrorism and bad terrorism. It is an attack on humanity, freedom and civilization. It knows no boundaries”, the Prime Minister emphasized, Only a uniform, unified and zero-tolerance approach can defeat terrorism.

But there is a marked difference between fighting a terrorist and fighting terrorism, as Modi also acknowledged. A terrorist may be neutralised with weapons and immediate tactical responses but these tactical gains will soon be lost without a larger strategy aimed at hurting their finances. “A terrorist is an individual but terrorism is about a network of individuals.” We must pursue terrorists, break their support networks and hit their finances for our citizens to be safe.

State support is one of the major sources of political, ideological and financial support for terrorism. Certain countries support terrorists as part of their foreign policy. There must be a cost imposed upon countries that support terrorism. Organizations and individuals that try to create sympathy for terrorists must also be isolated. There can be no ifs and buts entertained in such matters. The world needs to unite against all kinds of overt and covert backing of terror.

Organized crime is also another source of terror funding and there are deep links between criminal gangs and terrorist outfits. Action against organized crime is extremely important in the fight against terror. At times, even activities like money laundering and financial crimes have been known to help terror funding. Fighting it needs global collaboration.

New kinds of technology are being used for terror financing and recruitment. Challenges from the dark net, private currencies and more are emerging. There is a need for a uniform understanding of new finance technologies. It is also important to involve the private sector in these efforts.

-Cyber terrorism

The infrastructure used for cyber terrorism and online radicalization is distributed while some entities also train the terrorists with weapons from remote locations as well as online resources. Communications, travel, logistics – there are many links in the chain in different countries. Terrorists should not be allowed to misuse differences in legal principles, procedures and processes in different countries. This can be prevented through deeper coordination and understanding between governments. Joint operations, intelligence coordination and extradition help the fight against terror.

As scholar and author Sushant Sareen have said in the context of Jammu and Kashmir that on one hand thousands of people have died, families and properties destroyed, and an entire society traumatized, the one set of people who have prospered beyond their wildest imagination is the separatist mafia. The huge fortunes built by separatists and terrorists in Kashmir are one of the worst-kept secrets in Kashmir. Over the years, Kashmir has been transformed into a war economy, which needs to be dismantled.

For decades, the focus of the Indian security establishment in hotspots around the country has been more on seizing weapons than on cracking down on the funding networks. While in the West, security agencies followed the money to bust criminal syndicates and terror networks, in India the thinking was that the problem wasn’t the money but the munitions. Unfortunately, elements in the Indian security establishment have also contributed to the separatist entrepreneurship in Kashmir by plying the separatists with huge amounts of money in the fond hope of weaning them away from Pakistan and eventually winning them over – the former Intelligence Bureau chief in Kashmir and later Research & Analysis Wing chief, A S Dulat, has admitted as much in his book on Kashmir. Essentially what this meant was that the separatists raked in the moolah from all sides – India, Pakistan, within Kashmir, foreign donors, and so forth.

Little did the geniuses in the Indian intelligence community realize that this was a mug’s game because it only incentivized separatism by giving the separatist mafia an additional income stream without having to deliver anything in return. There might have been a time when the Indian approach to rupturing terror networks by bribing them would have been valid, but it has run its course.

-India Today sting operation

The trigger for the policy change appears to have been the remarkable sting operation carried out by intrepid reporters of India Today TV who exposed the shenanigans of the merchants of death in the Valley. The outcry after the expose probably gave the government the justification it needed for strangulating the funding of the separatists and terrorists.

In fact, among the most interesting aspects of the India Today sting operation was that the separatists who were exposed didn’t seem at all surprised or suspicious that middlemen from outside the state were offering them money to provide protection for their operations and even create disturbances to further their interests. If anything, the terror financiers saw they are dealing with these reporters who were impersonating middlemen from mainland India as nothing out of the ordinary, almost as if it was business as usual. Clearly, without busting the money laundering networks in cities like Delhi, Chandigarh, Kolkata, Mumbai etc. the entire NIA operation will not change anything at all. A few men may get arrested and face trial but it will be business as usual within a matter of weeks and months.

According to Jamwal, the militancy in J&K which originally started as a domestic movement has acquired transnational linkages since 1992-93. Save a small percentage of funds made through collections and donations made in the Valley, 90 percent of the funding is from other countries. It has been recorded that external funding is of a much higher magnitude than funding coming from domestic sources. Estimates indicate that between US $1,00,000-200,000 has been raised by JKLF, the diaspora and other Kashmiri groups. It is instructive to note that funding picks up in response to certain domestic events. For instance, the demolition of the Babri Masjid in 1992 led to large contributions to the kitty of terrorists operating against India.

Kashmiri militants obtain financial support from dozens of Islamic charities and radical Islamic organisations that channel funds to terrorist groups. The Pakistan-based Markaz-ul-Dawa-Ishad, the parent outfit of LeT and a religious organisation puts out regular advertisements in its in-house monthly magazine, Al Dawa. It urges Muslims to donate money to Kashmir ‘Jehad Fund’ and deposit it in bank accounts. 12 At its annual congregation in November 1998 at Muridke, near Lahore, the Markaz decided to raise Rs 5 crore including 3 crores to supply weapons to the Kashmiri ‘Jehad’, 1 crore for training and 1 crore to rehabilitate Kashmir refugees in POK. 13

Several First Information Reports (FIRs) filed by the Jammu & Kashmir Police in 1997 indicate that the senior leaders of the APHC receive donations from abroad. The nexus between narcotics and terrorism had led to a new term-Narco-Terrorism. It is recognized as one of the oldest and most dependable sources of terrorist financing, primarily because of the magnitudes of finance involved in both activities.

-Drug profits

Arun Kumar, in his book on Black Economy in India, says drug profits have been used to finance terrorism in the South, the North-East, Punjab and Kashmir. Pakistan’s involvement in Narco-Terrorism dates back to the era of Soviet intervention in Afghanistan. President Zia’s involvement in the narcotics trade is an open secret and he diverted some proceeds of this income towards funding the Kashmir ‘Jehad’ which continued even after his death. Narcotic smugglers based in Pakistan and controlled by ISI are reported to have earnings of over US $ 2.5 billion. According to a UNDP report, Pakistan’s heroin industry is estimated to have a turnover of US $ 74 billion. In early 1991, Pakistani Prime Minister Nawaz Sharief is learnt to have said that, the Pakistani Army Chief and the ISI Chief proposed a detailed ‘blueprint’ for selling heroin to pay for the country’s covert military operations.

Extortion has emerged as a major source of terrorist funding. Police and Intelligence agencies believe that most businessmen, shopkeepers, government employees, contractors, especially those dealing in timber and persons with the sound financial background are easy targets. They have bought peace by coughing up, as and when extortion demands are made. During 1990-95, Rs. 7.30 crore was looted by terrorists to fund their activities. Needless to say, estimates of extortion funds are impossible but could run into several crores of rupees per year.

This system has been in existence for a long time in India and other Asian countries. In India, it is known as hawala, in Pakistan as hundi, in China fei Qian (flying money), and the Philippines as black market peso exchange. 23 It is one of the important methods of terrorist funding in Kashmir, and is known as the underground or parallel-banking channel.

-Hawala system

Hawala is a system wherein with nothing more than a telephone and a fax machine, money can be transferred anywhere with no questions asked, no names used and no trail left for law enforcement. The Hawala route is used by the ISI and several other fundamentalist outfits in countries grouped under the Organisations of Islamic Countries (OIC) to send money to terrorist groups in J&K. Hawala funding is done through a network of dealers which extends from the OIC countries to Delhi, Mumbai and other places in India. Many of these Hawala dealers have begun wholesale/retail businesses as fronts to divert money to the J&K militant groups. Pakistani Finance Minister Shaukat Aziz, a former executive vice president of Citibank in New York said that US $2-5 billion moves through the Hawala system annually in Pakistan. This is higher than the amount of regular foreign transfers through the country’s banking system.

A US Treasury Department study identified Hawala as the preferred means of laundering monies from drug trafficking and other crimes in Pakistan. The report said Pakistan, India and Dubai on the Persian Gulf from the Hawala Triangle to move money secretly worldwide. One Abdul Rehman was arrested on December 6, 2001, with Rs 15.5 lakh in Delhi. This money was coming from Dubai for HM. Further, on the same day, Rs 40 lakh coming Hawala channels were recovered from a Kashmiri militant which was received by him through the Hawala channel. The Delhi Police arrested four Kashmiri militants on January 15, 2002, from the capital and seized Rs. 35 lakh from them. This money was received by militants from Pakistan through a Hawala operator in Chandni Chowk.

Jamwal concludes that terrorism in J&K is financed by a variety of sources, both national and transnational. While it costs the terrorists only a modest sum of money to destabilize the region and spread terror, the Indian Government has to set aside huge outlays to tackle the problem. A more effective method of fighting terrorism would be to launch a multidimensional offensive against all the sources-narcotic trade, extortion, counterfeiting, fake charities-as well as methods of financing, namely, hawala and front companies.


[Photo courtesy: PIB Delhi]

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