Counterfeiting of currency has traditionally been a key weapon in the hands of state sponsors of terrorism, terrorist organisations, organised criminal gangs, as well as money launderers all over the world.
Indeed, India’s security agencies have maintained for years that Pakistan is one of the few states, apart from North Korea, that continues to use counterfeit money as a means of targeting a country.
Combating counterfeiting is expensive not only in terms of fighting terrorism, but in pure economic terms as it forces a re-design of currency every five years.One source of terror financing, especially with regard to India, is that of fake Indian currency notes (FICN). While some of the most significant channels of terror financing (TF) have included hawala, cash couriers and infiltrating terrorists, the counterfeiting of Indian currency notes remains a key part of the puzzle.
Also read: Value of Fake Notes Seized Doubled in 2017, But What About Demonetisation’s Effect?
There is also some evidence to indicate that the ISI has used a significant part of its production of Indian counterfeit currency to finance illicit activities and militant groups in India, including Lashkar-e-Taiba (LeT) and its affiliates, Jaish-e-Mohammed, Hizbul Mujahideen and Al-Qaeda/LeT’s joint operative, David Headley (who reportedly used such currency for a recce in 2007/08 before the 26/11 bombings).
On November 8, 2016, the bulk of FICN was extinguished when Rs 500 and Rs 1000 notes were scrapped.
Since then, however, several reports have emerged of FICN seizures within India, but os allegedly poor quality – photo-copied or scanned notes, many with the same serial number.
In the past few months, again, reports have emerged of better visual quality FICN, sourced from Pakistan, making its way into India using pre-2016 infrastructure; that of gangs, networks, channels and routes.
Post-2016 activities
In the past three months, three significant seizures indicate the possible return of ISI agents and Pakistan’s printing presses to the game.
Recent initial reports have begun to emerge of ISI managing to create FICN of better visual quality than photocopied/scanned notes.
In May 2019, a recently released D-company associate, Younus Ansari, was arrested along with three Pakistani nationals at Kathmandu airport with a huge consignment of Rs 7.67 crore. The temerity of the couriers was obvious in the fact that the stash was not even concealed, as in the past, but was loosely dumped into check-in baggage. The consignor is believed to be notorious Pakistan-based FICN smuggler Razzak Marfani.
On September 22, 2019, police in Punjab seized FICN worth Rs 10 lakh from KZF cadres, who had received five AK 47 Rifles, 30 bore pistols, nine hand grenades, five satellite phones, two mobile phones and two wireless sets – all allegedly couriered through drones across the international border with Pakistan.
Also read: The Curious Case of Black Money and Cash Hoarding
Again, on September 25, police in Dhaka seized FICN worth Rs 49.5 lakh. A Dubai-based individual ‘Salman Shera’ had sent the parcel to Sylhet, Bangladesh which was being transited to Dhaka via a courier service ‘SA Poribahan.’
The individuals apprehended revealed that from Sylhet the consignment was headed to Sreenagar Upazila in Munshiganj District, Dhaka. The original consignor Salman Shera is also the son of Aslam Shera, a notorious Pakistan-based ISI-wholesaler, active since the late 1990s.
Self-sustaining economic model
The trade flows of this highly organised FICN racket are organised as a profit-making economic model, thereby making it self-sustaining.
How did this model work? At the first stage, money would be printed in Pakistani presses, on currency standard CWBN printing paper often imported for printing Islamabad’s currency. It would be printed on the Simultan Dual Offset Printing Machine, using ink and dyes licensed for sale to Pakistan by currency material manufacturers.
None of these have technically, ever imitated the features on the genuine Indian note. However, the visual imitation quotient was very high. It has, to put it simply, been enough to mislead the common man.
The first leg of this complex smuggling network involved wholesaling by ISI agents to identified wholesalers residing within Pakistan.
Then, smugglers identified couriers to ferry consignments of FICN on airlines operating from Karachi to six staging-post countries, namely Qatar, UAE, Malaysia, Thailand, China, and Sri Lanka.
Also read: How Successful was Demonetisation? Four Takeaways From the RBI’s Annual Report
The third leg involved another connecting flight from any of these six countries to Kathmandu, Nepal or Dhaka/Chittagong, Bangladesh.
The fourth leg of this smuggling syndicate involved the infusion of these consignments, broken into small parts, sometimes as small as Rs 1 lakh to prevent the risk of detection, through Indian borders and to smaller wholesale networks.
The fifth and final leg was the retailing of FICN in rural areas, cattle markets, real estate ‘black’ transactions and for purposes of malfeasance to common, mostly unsuspecting consumers.
The economic model of this enterprise was based on 10% mark-ups – ie. margins – at each leg. The ISI supplied the FICN at 20% (INR 200 or PKR at prevalent exchange rates, per FICN 1000). The buyer in a staging-post country paid 30%, while the one in Nepal/Bangladesh bought at 40%, with the wholesaler in India paying 50%.
This was the generally accepted mark-up game in the days leading upto November 8, 2016, when all Rs 500 and Rs 1000 notes were withdrawn, thereby annihilating most of the FICN stock in one shot.
After a gap of three years, it appears that Pakistani actors may have once again initiated the production of FICN, using the same infrastructure and smugglers and foreign locations as it did prior to November 2016.
Vaishali Basu Sharma (@basu_vaishali) is a former consultant at the National Security Council Secretariat of India.