Terror Funding: What Can Be Done to Cut the Pipelines That Flame Militancy?

Three weeks ago, India was rocked by one of the deadliest terror attacks in Kashmir with one of the highest casualty rates in recent times. The attack, perpetrated by Pakistan-based terrorist organisation Jaish-e-Mohammad (JeM), claimed the lives of 40 Central Reserve Police Force jawans.

This, however, is not the first time that the group has struck terror on Indian soil. In the past, numerous deadly attacks have been carried out by JeM; the 2001 Indian parliament attack and the 2016 Pathankot airbase attack are just two in a long list of JeM’s terror activities.

The organisation’s chief Masood Azhar, despite global outrage, has found continued refuge in Pakistan. India has attempted to have him listed on the UN’s designated list of global terrorists but it has been blocked by Pakistan’s all-weather ally, China, time and time again.

While the environment in the Kashmir Valley is only likely to become more strained, with no dip in militant and terror activities in sight, the question that must be answered is – what can be done to curtail the funding of terrorist activities? And has the Indian government done enough to cut the pipelines that flame terrorism and militancy in India?

In light of the recent attacks coupled with the impending spring offensive in the Valley, it is crucial that one analyse the non-kinetic strategies at the Indian government’s disposal to combat terrorism, especially regarding the problem of the flow of money for terrorist activities and the solution.

Why funding matters

When assessing the threat from any terrorist/militant group one must evaluate (i) its intent, i.e. its ideology and/or political goal; (ii) its capability; and (iii) the opportunities to act on the threat. The absence of one or more factor reduces its credibility. A group cannot carry out an attack or continue operating, despite its intentions, if it does not have the infrastructure (or the capability) to back itself up. It is here that finances become a key enabler of terrorism – to buy weapons, to train forces and to execute attacks.

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Terror groups understand this very well and thus, have over time, come up with various sources of funding, using legal and illegal fronts. Charities, at one point in time, were one of the most important sources of terrorist funding. Contributions collected by both individuals and charities in Saudi Arabia were a crucial source of income for the global terror group al-Qaeda.

For instance, even today, Lashkar-e-Taiba (LeT) and its political arm in Pakistan, the Jamaat-ud-Dawa, use funds collected by their charity, the Falah-e-Insaniat Foundation. Unfortunately, while the Indian government has not been able to do much about these flow of funds in the past, other than lament, it has tightened the noose around not-for-profits in the country for its own vested interests.

Nexus between terror financing and organised crime

Another key source of terror funding stems from the link between terrorists and organised crime. Unfortunately, the glitzy Hollywood films about drugs and arms dealers and their connections with terrorists are not all too far-fetched. It is because of these overlaps that the fund-pool for terrorism remains well stocked. Money made from routing exploits through the trafficking of narcotics, weapons and counterfeiting often finds its way into the pockets of terrorist outfits.

The International Monetary Fund estimates that the amount of money laundered globally each year to be between 2 and 5% of the world’s GDP, which is USD 800 billion. Even if just a small proportion of these laundered funds are used to carry out terrorist activities, the damage can be enormous.

To bring some perspective – it is believed that while it cost al-Qaeda just $500,000 to carry out the 9/11 attacks, it is estimated that the US economy took a hit of 3.3 trillion dollars arising from the physical damage, insurance payouts and the subsequent “war on terror”.

Of course, most attacks do not require huge sums of money, but half a million dollars to carry out a ‘terror spectacular’ for large or well-stocked groups, such as al-Qaeda and the Taliban, is just a minuscule portion of the revenues raked in from kidnap-for-ransoms, drug trade, human trafficking and other nefarious activities.

For instance, the infamous opium trade in Afghanistan not only contributes to 85% of the world’s opium but also amounts to a $60 billion trade, a large portion of which is controlled by the resilient terror group the Taliban.

The 1993 Mumbai blasts hit closer home. The 13 explosions that shook different parts of the city, resulting in 257 fatalities and over 700 injured, brought to the limelight the nexus between the underworld criminal syndicate and terrorism in India. After an investigation, the Indian government found that while the attacks showed the involvement of Pakistan’s Inter-Services Intelligence, the bombings were financed by UAE-based expatriate Indian smugglers.

Indian laws to tackle terror financing

The Mumbai blasts highlighted the need to crackdown on the overlaps between terrorism and crime. Taking cognisance of the rising crime situation in Maharashtra, particularly in Mumbai, the Maharashtra Control of Organised Crime Act (1999) was brought into effect.

Similarly, the Unlawful Activities (Prevention) Act, 1967 (amended in 2004, 2008 and 2012) recognised the role played by finances and hence criminalised the raising of funds for a terrorist act or group as well as holding proceeds from terrorist activities.

Also Read: To Better Fight Terrorism, Europe Needs More Cooperation and Money

There are also other individual laws in India that target financial malpractices and its role in funding illegal activities, such as the Foreign Exchange Management Act (1999), Prevention of Money Laundering Act (2002) and The Narcotic Drugs and Psychotropic Substances Act (1985).

Within the last two years, the Foreign Exchange Management Act (FEMA) has been used at least twice by investigating agencies to issue show-cause notices to suspected terror operatives and hawala dealers.

In April 2018, a Jammu and Kashmir-based businessman, who had previously been arrested by the National Investigation Agency on grounds of suspicion, was issued a notice under FEMA for allegedly acting as a conduit for terror groups. Earlier in 2017, similar notices were issued to an alleged LeT operative Mohammed Ayub Mir and two Delhi-based hawala dealers, Bech Raj Bengani and Harbans Singh.

While India has individual legislations to address financial crimes, they do not appear to be sufficient in light of the continued terror and militant activities in the country. One reason behind this is possibly due to the political patronage enjoyed by crime. While politicians are emphatic in their stance against terrorism, organised crime often blossoms under the patronage of the very same politicians. The criminalisation of politics in India, especially since the 1980s, has even become a subject of scrutiny under the country’s Supreme Court.

Further, the possible misuse of strong terror laws, which often don’t carry any punitive action against officials found misusing the law, has been used by the political leadership to crush dissent in parts India. The Terrorist and Disruptive Activities (Prevention) Act (1987) and the Prevention of Terrorism Act (2002) were promulgated in states like Uttar Pradesh and Gujarat, where there was no palpable threat to national security or even any trace of the presence of armed groups.

Cyber: The new warfront

Changing times necessitate changing landscapes for the war on terror and this means that the contours of terror financing are also evolving. The limitations of the above-mentioned Indian laws are further exacerbated by the fact that numerous terror groups globally are turning to the ‘dark web’ to route money as opposed to relying on traditional avenues, such as shell companies, unaccounted means (hawala) and banks. Add to the dizzying mix, unregulated and decentralised cryptocurrencies, such as the bitcoin, and the equation becomes tougher.

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A 2016 study found that nearly 57% of the dark web comprises of a vast array of illegal content – from pornography, illicit finances, drug networks, weapons trafficking, counterfeit currency to terrorist communication. The black market for these arms on the dark web is believed to offer more recent weapons at competitive prices.

While the West takes the lead in being the key source and buyer of weapons off the online market, the circulation of illegal arms hits everyone. The dark web enables ‘lone wolfs’ and smaller independent groups to access weapons, terrorist propaganda and handlers in an effortless fashion making it a dangerous affair.

Does India have sufficient paraphernalia to combat this evil on a whole new front? In India, the public is still on the fence about its government’s ability to protect large data, such as the Aadhaar repository. In such a case, it is unlikely that the country will be prepared to target new cyber routes.

Also Read: India Welcomes Decision to Put Pakistan Back on Terror-Financing Watch List

Taking the war to cyber, particularly the ‘deep web’, means enhancing our ability to identify, prevent and counter not just terrorist activities but also other criminal activities that function in tandem with it. This isn’t particularly easy as masking the identity of the person hosting the information as well as accessing it is far easier on the dark web.

The way forward

The fight against terror financing, it is important to note, is not limited to one’s borders. Isolation of and censure of countries that are sponsors and/or enablers of terrorism needs global resolve.

In 2018, India was able to push for Pakistan to be put on the International Financial Action Task Force’s (FATF) ‘grey list’ after it was taken off the list in 2015. The recently concluded FATF session in Sydney saw India raising numerous questions about what steps its neighbour had taken against terror groups on its soil, including JeM and Lashkar-e-Taiba.

This fight is a multi-front war – dealing with external benefactors needs to go hand in hand with setting up internal deterrence measures. Moreover, it requires collective action from all nations. While India was reeling under the Pulwama attack and witnessing the aftermath of the Balakot airstrikes, London was on the edge of its seat as a result of a bomb threat.

The groups planning terror attacks might differ but the routes and means used by them do not. Curbing the flow of money that enables and amplifies these attacks requires global cooperation and setting aside vested interests.

Akanksha Narain works with a political and security risks consultancy. She has previously worked as a researcher with think-tanks in Singapore and India and is a visiting fellow with Centre for Anti-Terrorism Studies (CATS) at National Security Guard, Manesar.