By Colonel B. S. Nagial (Retd.)
On 11 September 2001, terrorism crossed all the boundaries and became faceless yet a lethal weapon after it struck the US. The magnitude of the attack, the targets chosen, planning and infrastructure involved were beyond the imagination of scholars, security analysts and the policy makers. Since then, it has stimulated new national and international endeavours to track the ways and means of terrorist funding to clog them effectively. Nevertheless, evidence on terrorist sustenance edifices is challenging to stumble upon and even if it comes out, it is vague and mostly unreliable. Maybe only the intelligence and security agencies have a specific inkling of the roots and extent of financing terrorism. For example, investigators in the US believe that terrorists had spent about US$5,00,000 to carry out their 9/11 attacks. However, it will likely cost the US at least $100 billion to repair the damage.
Terrorist organisations require funds to survive, thrive and carry out terror and violent actions. The financing of terrorism involves the resources of revenue and methods undertaken by terrorist organisations to fund their nefarious activities. The required funds could be generated through permissible sources such as profits from businesses and charitable organisations. But generally, terrorist organisations get the money from illegal resources such as the smuggling of arms, ammunition, logistic stores, drugs, etc. or kidnapping for payoff.
Combating the financing of terrorism is an extremely intricate venture which involves multifaceted activities and players. It requires both legislation and ground-level operations involving different agencies. Taking a stride in the direction of combating terrorist financing, the United Nations Office of Drugs and Crime (UNoDC) issued the guidelines through the International Convention for the Suppression of the Financing of Terrorism in 1999. By implementing these conventions, the member nations could develop capacities of criminal justice and law enforcement agencies to investigate, prosecute and adjudicate terror financing. To track the financing of terrorism in India, a Terror Funding and Fake Currency (TFFC) cell has been set up under the supervision of the National Investigation Agency (NIA). It focuses on terror funding as well as fake currency notes. India has also strengthened the provisions enumerated in the Unlawful Activities (Prevention) Act 1967 to combat terror funding. It is the responsibility of all States and Union Territories to prevent the financing terrorist networks.
The main aim of persons or entities involved in terror funding is to conceal the sources of money and funding activities. Money laundering is the process of concealment and camouflage of illegal origins and proceeds of criminal activities dealing with money. In both cases, the illicit use of the financial sector is involved. The most disturbing fact is that money laundering equips corruption and organised crime. The techniques used in money laundering and financing terrorism are similar, identical, and somewhat overlapping. Therefore, anti-money-laundering/ countering terror financing must address both these risks.
Today, the world is technology driven. Swift developments in financial information, technology, and communication permit money to travel worldwide easily and quickly. This makes the job of anti-money laundering/ combating terror financing more dynamic and challenging. Terrorists frequently change their methods and means of raising and moving funds & other assets to hide their activities from the agencies involved in countering them. Thus, it is imperative to identify correctly, assess and understand the mechanism of funding terrorism. This is very crucial for the disruption and dismantling of terror funding networks.
Modus Operandi of terror funding
Terrorists need funds to function as an organisation. With the money, they buy arms, ammunition, and other warlike stores. Their sources of funding could be both legal and illegal. Funding generally takes place in small amounts. Terror financing is a worldwide phenomenon threatening the world community’s peace and security and weakening economic development and market stability. Therefore, it is essential to curb the flow of funds to terrorist organisations.
Though terrorist organisations and their tactics have evolved, yet the primary requirement of the terrorists to raise, move and utilise funds has not changed over a period. The funds are mobilised in numerous ways, such as exploiting legitimate commercial ventures and natural resources, abuse of non-profit organizations, non-governmental organisations, and crowdfunding sites. Terrorist organisations might also be directly or indirectly associated with organised inimical groups/ people. They might involve them in felonious actions, such as drugs, arms trafficking, human trafficking, blackmailing, and kidnapping for money. Nations are always worried about terrorists’ ill use of the Internet and other emerging technologies to garner and move funds, including through virtual currencies. Tracing measures and scrutiny of financial intelligence provide critical information on terrorist networks and their links with individual terrorists and Foreign Terrorist Fighters.
Terrorism in India
Terrorism in India could be divided into four major categories as Terrorism in Jammu and Kashmir, Terrorism in the hinterland, Left-Wing Extremism (LWE) and Insurgency in Northeast states of India. Their activities include terrorism, secession, smuggling, production and circulation of Fake Indian Currency Notes, terror funding, etc. According to the accessible intelligence reports, terrorists who are in action in India are frequently reinforced and financed by their parent organisations located outside, predominantly in Pakistan, in the forms of shelter, training, weapons and finance.
Countering terror funding and anti-money laundering in India
There are four components of the financial market in India – banking companies, financial institutions, the securities sector, and insurance companies. A fully functional Financial Intelligence Unit (FIU) was established in the country in 2006 as a chief national agency in charge of receiving, processing, analysing and disseminating information relating to suspect financial transactions to enforcement agencies and foreign FIUs. It reports directly to the Economic Intelligence Council (EIC) under the Finance Minister of India. The other members of the EIC are heads of all the intelligence agencies, the Governor RBI, and the Chairman of SEBI.
Agencies involved in the AML/ CFT system
The Ministry of Finance is accountable for fiscal policies in India, including revenue and tax collection, budgeting, and expenditure of the Govt of India. Department of Revenue oversees monitoring and implementing control over the AML/ CFT strategies and coordination with the Directorate of Enforcement to confirm the implementation of these measures as enumerated in the Prevention of Money Laundering Act 2002. The Economic Intelligence Council acts as the leading directing authority regarding economic offences, strategies for intelligence sharing, coordination, etc. The execution of decisions taken by the EIC is scrutinised by the Working Group on Intelligence Apparatus, set up for this purpose within the EIC.
The Inter-Ministerial Coordination Committee (IMCC) on anti-money laundering and combating terrorist financing is tasked with developing and implementing policies on anti-money laundering or countering the financing of terrorism. The Enforcement Directorate is assigned to examine the crimes of money laundering as per the provisions laid down in the Prevention of Money Laundering Act, 2002 (PMLA) and is also authorised to initiate actions for attachment and confiscation of property if needed. The Ministry of Home Affairs is the controlling Ministry for ‘combating financing terrorism’ in all its appearances. The MHA also administers various security, investigative and law enforcement agencies such as the National Investigation Agency, the Narcotics Control Bureau, and the Intelligence Bureau.
Until 31 March 2022, attached crime proceedings were worth Rupees 1,04,702 crores initiated by ED, 992 cases were charge-sheeted, and property worth Rupees 869.31 crores were confiscated, and 23 people were convicted. For the last ten years, maximum cases for money laundering under foreign exchange regulation were recorded.
Emerging threats of financing terrorism
Social media, new payment products and services, and exploiting natural resources are new trends terrorists generally employ to finance themselves. Sometimes, it is not easy to track and detect online money laundering cases for the following reasons:
- Complexity of the payment chain. There could be several combinations of the payment cycle involving shopping carts, payment gateways, payment processors and banks. Payment goes through multiple processors and gateways. Very difficult to distinguish between legitimate or illegitimate transactions.
- Inability to safeguard the websites. Some merchants may not be aware that their websites are being used for illegal transactions. This transaction could be done through affiliate programs or using the site as a shadow site.
- Numerous unreported websites. Transaction violations could be done through hidden sites that banks may not be aware of and hence do not track. It is challenging to detect unreported sites.
- Growing use of corporate credit cards in business-to-business (B2B) payment. Till 2018 this system grew by over 45%. Some business houses offer attractive cash-back schemes bypassing the Automatic Clear House (ACH). Colossal money is transacted through such routes.
Terrorism cannot survive without money. Modern times, managing a terrorist organisation’s funds requires an administrative and command network system with the help of professional terrorists. Though the organisation’s ideology drives most, they are paid. In addition to salary, a considerable amount is required for acquiring weapons and warlike stores, training, and infrastructure. So, one of the most efficient ways of dealing with terrorist organisations is to blockage the flow of funds.
To blockage such activities of terrorists require legislative measures at both national and international levels. At the national level, the Prevention of Money Laundering Act, 2002, is an Act of the Parliament of India enacted to prevent money laundering and provide for confiscation of property derived from money laundering. And The Financial Action Task Force (FATF) is the watchdog of global money laundering and terrorist financing. The inter-governmental body sets international standards to prevent these illegal activities and the harm they cause to society.