Where The Terrorist Buck Stops

The United Nations Security Council Resolution 1373, proclaims: "…all States shouldprevent and suppress the financing of terrorism, as well as criminalize the wilful provision or collection offunds for such acts." India is a strong supporter of this resolution, and has long and loudly protestedthe regime of international tolerance (and occasional support) that has allowed front organisations ofterrorist groups operating in India to mobilise funds in other parts of the world, and to transfer thesethrough elaborate financial mechanisms, instrumentalities and intermediaries, to the final perpetrators ofterror in the field.

Ironically, within India, there appears to be little political will to destroy thefinancial support structures of terrorism. This was particularly in evidence in the announcement by the newPeople's Democratic Party (PDP) - Indian National Congress (INC) coalition in the terror afflicted State ofJammu and Kashmir (J&K), headed by Mufti Mohammed Sayeed, that it would not implement the Prevention ofTerrorism Act, 2002 (POTA)  in the State. POTA is the only instrument that criminalizes the mobilisationand transfer of financial resources to terrorists in India.

International hawala (trust) transactions lie at the heart of the web of terrorist financing - as of awide range of organised criminal and illegal business operations - and constitute a reliable option thatalmost leaves no paper trail, and escapes conventional detection mechanisms, even as it transfers largequantities of funds across the globe in a matter of hours.

India has among the weakest and most licentious regimes in the world for the control of financial crimes.Under the Foreign Exchange Management Act, 1999, hawala is only a civil offence and persons violatingits provisions can be penalised with fine up to three times the amount detected in a contravention.Prosecution under FEMA is complex, as foreign exchange violations, unlike other crimes enumerated underpurview of the Criminal Procedure Code (CrPC), do not leave a trail of evidence, especially in hawalacases.

Evidence collected is more often than not inadmissible under the prevailing legal system;inordinate delays in prosecution (the litigation process often takes decades before a final determination)lead to disappearance of material witnesses as also the tampering of evidence; in the rare case of eventualconviction, the penalties applied seldom explore even the available upper limit under the law.

Section 22 of POTA was intended to provide for a harsher process and penalties in cases of fund raising for aterrorist organisation. Such activities are treated as a criminal offence and a person found guilty under thisSection is liable, on conviction, to imprisonment for a term of up to 14 years, or fine or both.

This gave teeth to enforcement agencies charged with meeting the mounting challenge ofterrorism, though the task is still far from simple: investigators have to prove that the money securedthrough hawala routes did actually finance or was used in a particular terrorist incident or operation.Hawala conduits and certain secessionist leaders in J&K have in the recent past escaped prosecutionas a result of the problems of demonstrating such 'end use'.

Nevertheless, there have been a substantial number of recoveries and arrests in such transactions in J&Kin the post-9/11 period. On December 6, 2001, the arrest of Abdul Rashid Lone, 'group commander' of theHizb-ul-Mujahideen (HM) in the Baramulla area, led to recovery of Rs Four million. On the same day, AbdulRehman Sofi alias Rehman Lala and Mohammed Shabban Khan were arrested in Delhi returning from a meeting withHM chief Syed Salahuddin in Pakistan. Their confessions led to the recovery of Rs. 1.5 million receivedthrough hawala for distribution to the HM, Lashkar-e-Toiba (LeT) and Jaish-e-Mohammed (JeM).

On December 13, 2001, the killing of Nazir Ahmad Yattoo, alias Shakir Ghaznavi, HM'divisional commander' (who was also looking after the distribution of finances), in an encounter withsecurity forces at Pattan in Baramulla district, was followed by the recovery of Rs. 3.2 million. On January14, 2002, the arrest of four Kashmiris linked to the LeT at Delhi led to the recovery of Rs. 3.49 million,which they had received through hawala on behalf of the South Kashmir Valley 'commander' of the Lashkar.

The four, according to official sources, had arrived at the capital with plans to causeexplosions at crowded places and disrupt normal life in the run-up to the Republic Day Parade on January 26.Another Rs. 460,000 was recovered from a Delhi-based Hawala operator who had provided the money to theLashkar activists.

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 recovery of Rs. 4.8 million meant forYasin Malik, Chairman of the JKLF. Khan revealed during interrogation that she had received the money from aHurriyat activist, Altaf Qadiri, at a hotel in the Bagh Bazaar area of Kathmandu in Nepal.

Subsequently, the arrest on May 22, 2002, of Imtiyaz Ahmed Bazaz, a Srinagar-basedjournalist, led to the unravelling of an elaborate hawala network. Bazaz is reported to have worked asa conduit for the flow of finances from the London-based physicist Dr. Ayub Thokar, President of the WorldKashmir Freedom Movement, to Asiya Indrabi, chief of Dukhtaraan-e-Millat (DeM) and Syed Ali Shah Geelani, aformer chairman of the secessionist All Parties Hurriyat Conference (APHC).

Consequently, Geelani was arrested on June 9 under POTA and shifted to the Ranchi centralJail in Jharkhand State, on charges of receiving money from Pakistan's Inter Services Intelligence (ISI)through hawala channels and later distributing the same to different terrorist groups, including theHM. Bazaz is reported to have confessed that HM chief Salahuddin, had been sending money to his local'commanders' through Thokar and Geelani. Moreover, as Indirabi's husband Qasim Faktu was 'financial chief' ofJamiat-ul-Mujahideen (JuM), she also received money from Thokar through Bazaz to provide finances to JuM aswell as DeM.

While action against Thokar and his London charity, Mercy International, has been initiated at the highestlevel by the British Government, the recipients of many such hawala transactions traced to Thokar areslated to go free and unpunished, courtesy the Mufti government's unwillingness to allow prosecutions underPOTA, the only available statute that could bring them to book. Latest reports from the State indicate thatthe Mufti regime is contemplating the release of Geelani and Yasin Malik.[Yasin Malik has since been released-- Ed] Such action could only sustain and strengthen the increasingly invisible sources of the finance ofterrorism.

The convergence of invisible transfers and the secessionist terrorist movement in J&K is discernible inthe fact that the APHC, according to official estimates, spends approximately Rs. 15 to 20 million per monthon its various organisational expenses. It is not a registered organisation and does not file any income taxreturns. Furthermore, there is no local fund collection by the Hurriyat, and the predominant proportion of theAPHC's funding can either directly or indirectly be traced to the ISI. Individual constituents of the APHCalso independently secure funds through sister organisations in Pakistan and Pakistan occupied Kashmir (PoK),such as the Jamaat-e-Islami, Muslim Conference, Jamiat Ahle Hadis, People's League, etc.

The individual constituents also get funds through expatriate Kashmiri organizations likeThokar's World Kashmir Freedom Movement, Nazir Qureshi's World Assembly of Muslim Youth in Saudi Arabia, etc.The JKLF, an important Hurriyat constituent, receives funds through its branches in a few countries, includingSaudi Arabia, UAE, Qatar, Kuwait, USA and UK.

Income Tax (IT) Department investigations into Geelani's transactions have revealed thatthe monthly personal expenditure at his residence was more than Rs 150,000 against his declared annual incomeof Rs 17,100. IT returns filed by Geelani indicate that he was getting Rs 7,100 as pension for being a formermember of the State Legislative Assembly and Rs 10,000 as agriculture income, which works out to less than Rs1,500 per month.

The intricate hawala network, according to official estimates, profits every conceivable terrorist andsecessionist group in the State. Indeed, senior police officials claim that militancy in the State has emergedas a highly lucrative 'industry' for several thousand families. Apart from the major groups, cadres of anumber of lesser known organisations that have mushroomed in the extremist milieu that is J&K today, havealso cornered shares in the substantial illicit financial flows.

Thus, Yaqoob Vakil who was arrested on June 20, 2002, confessed to having provided finances(Rs. 1.5 million during 2001 and Rs. 2.0 million in 2002) to Valley-based Al Umar Mujahideen cadres at thebehest of the outfit's chief, Mushtaq Ahmed Zargar, one of the three terrorists released to end the seven-dayhijacking of the Indian airlines aircraft in Kandahar (southern Afghanistan) in December 1999. On June 29,2002, security agencies neutralized a Tehrik-ul-Mujahideen channel, operating through Bashir Ahmed Sofi,Inayat Ali, and Mehraj-ud-Din Bhat, through which Rs. 10 million crore had been transferred to the Tehrik.

Yet another Tehrik channel came to light with the arrest on July 22, 2002, of Shaukat AhmedShah, chief of Jamaat-Ahle-Hadis, J&K, and an ideologue of the Tehrik-ul-Mujahideen, on charges of routingfunds to the tune of Rs. 4.0 million to the terrorist group. On August 2, 2002, Abdul Rashid Bhat was arrestedwith a consignment of Rs. 1.0 million while attempting to pass funds on to the Al Badr group (he had earlierchannelised two transactions worth Rs. 800,000).

Many J&K-based doctors, engineers, technicians and certain business houses working in the Gulf and engagedin the provision of various services, or export of goods, such as carpets and handicrafts, have diverted fundsthrough hawala operators to finance militants and secessionist leaders. Among one of the currentlypopular modes of hawala transfer is the movement of money through small-scale businessmen, such asshawl vendors. Although individual amounts involved in these transactions are small, very large numbers ofsuch transactions result in transfers of great magnitude.

The ease with which transfers take place is visible, not only in the free availability of resources to allterrorist groups operating in J&K and other parts of the country, but also in the movement of such fundsinto the bank accounts of terrorists like the 9/11 hijacker, Mohammed Atta through JeM terrorist Omar Sheikh,with no paper evidence left behind. The arrest of Aftab Ansari alias Farhan Malik, a Dubai-based Mafiosi,for his role in the January 22, 2002, terrorist attack on the American Centre in Kolkata revealed that he hadmasterminded the abduction of Kolkata-based businessman Parthapratim Roy Burman and extracted a ransom of$815,000 via Dubai through hawala. Omar Sheikh had reportedly wired $100,000 to Mohammed Atta out ofthis money.

The largest flow of money towards terrorist groups is through hawala transactions routed through theGulf region. The scenario has been rather dismal for Indian enforcement agencies vis-à-vis Dubai, the hub ofthe hawala racket, along with Pakistan. Lack of laws that explicitly prohibit hawala, and thefact that Dubai is a free trade zone, have not only led to complexities in curbing the practice, but also to avery low priority ascribed to such activities by the enforcement agencies in that country.

A substantial proportion of finances for Islamist terrorist groups active in J&K andelsewhere, is also routed through the Pakistan High Commission in New Delhi. The other routes of moneytransfer are through Nepal and Bangladesh, as also through infiltrating groups directly crossing the Line ofControl (LoC) and the International Border from Pakistan.

Confronting this intricate web which provides terrorist operations across the world with the wherewithal toact, and which is substantially supported by both organised crime networks and by a number of state sponsorsof terrorism, as well as by several state agencies in countries that are sympathetic to the Islamist extremistcause, is an enormous challenge.

This is the case even where an efficient legislative, investigative and judicial mechanismis in place. Where the legitimacy of every legal instrument to bring the problem under control is itselfundermined by the political executive - as is the present case in J&K - and where the judicial process ismarked, not only by extraordinary sluggishness, but by frequent and active hostility against the investigativeand prosecuting agencies, the prospects of defeating terrorism and re-establishing the rule of law areminimal.

The author is Research Associate, Institute for Conflict Management. Copyright: South AsiaIntelligence Review of the South Asia Terrorism Portal, where it appeared as J&K: Losing The War AgainstTerrorist Financing?