In his address to the 43rd Munich Conference on Security Policy on February11, 2007, ShriM.K.Narayanan, National Security Adviser of the government of India, spoke of the various ways in which terrorist activities in India are funded. While doing so, he said: "Isolated instances of terrorist outfits manipulating the stock markets to raise funds for their operations have been reported. Stock Exchanges in Mumbai and Chennai (India) have, on occasions, reported that fictitious or notional companies were engaging in stock-market operations. Some of these companies were later traced to terrorist outfits."
Stock markets as a likely source of funding for organised crime, terrorism and covert operations of intelligence agencies has been asubject which has been engaging the attention of not only intelligence and security agencies, but also stock market regulating authorities for many years. Organised criminal mafias, terrorists and intelligence agencies seek to covertly use the stock markets for earning funds as well as causing economic instability in a target country. They generally use two methods for this purpose: stock market operations and stock market manipulation. Stock market operations help them to earn money and launder black money and stock market manipulation helps them to earn and launder money as well as cause economic instability.
For a stock market operation, they use individual stock traders or companies—either floated by them or theirsurrogates— for buying and selling shares and making profits —like any other person interested in the stock market. Their operations are legitimate, but the source of their investments or the ownership of their companies is not. The only effective way of preventing this is by making enquiries about such individuals or companies, identifying those suspected to be acting as a front for crime mafias or terrorists or intelligence agencies and acting against them.
Even before 9/11, it was well documented by the intelligence and security agencies of Western countries that Al Qaeda had an extensive financial and business network operated through surrogates. Some of them indulged in stock market operations for making profits and laundering black money. Othersearned money from seemingly legitimate businesses such as travel agencies, construction companies, real estate companies etc.
Are the terrorists also indulging in stock market manipulation—that is, artificially pushing stock prices up or down either to earn money or to cause economic instability? Since the terrorists know in advance the dates of their planned terrorist strikes, which often have an impact on the stock market, they can use this advance knowledge to push prices up or down. So, it was feared.
In the days before and after the 9/11 terrorist strikes in the US, there were erratic movements in not only the New York Stock Exchange, but also in the Stock Exchanges of some European countries. Some of these erratic movements affected the shares of airline companies. This gave rise to widespread speculation and fears that Al Qaeda, which had advanceknowledge of the date of its terrorist strikes, had used this knowledge in an attempt to make money and in a futile attempt to cause an economic collapse. Some even believed that the real target of Al Qaeda was not the New York World Trade Centre, but the stock markets of the West. It was alleged that by destroying the towers it was hoping to cause a collapse of the Western stock markets, which did not happen.
Independent enquiries were ordered by the governments of the US and the European Union countries into this matter. The US National Commission, which enquired into the 9/11 terrorist strikes, looked into this speculation also and reported as follows: