Official estimates indicate that Fake Indian Currency Notes (FICN) worth over USD 2.2 billion were in circulation in India by 2010, pumped in over the years by Pakistan’s Inter Services Intelligence (ISI) in a strategy intended simultaneously to destabilize the Indian economy, even as it released substantial funds for Islamist terrorism on Indian soil. In 2005, the seizure of FICN in India amounted over R 70 million; this rose to INR 100 million in 2007; and R 258.9 million in 2008, R 229.8 million in 2009. During 2010, 1,850 cases of the circulation of significant quantities of FICN were detected and fake notes to the tune of R 258.27 million were seized, and 1,265 persons were arrested. A bulk of cases detected indicates a strategy of widespread dissemination of relatively small quantities through a multiplicity of agencies, including terrorist formations. Some cases detected in 2011 help illustrate the pattern:
March 7, 2011: Three cadres of the Hizb-ul-Mujahideen (HM), including one ‘communications expert’, was arrested near the Khan Market area of New Delhi for allegedly running a FICN racket. Police claimed to have recovered counterfeit notes with a face value of R 1 million from them.
April 17, 2011: A scrap dealer, identified as Zubair Alam, was arrested in New Delhi, along with FICN worth R 110,000.
April 24, 2011: Police arrested five persons and seized FICN worth R 954,000 from their possession near Arif Ke village under Mallanwala Police Station in Punjab. Customs officials also recovered FICN worth 200,000 from a goods train, which runs between India and Pakistan for trade activities at the Attari Railway Station located close to Pakistan.
The FICN seized by the Police from various operations exhibit a very high degree of sophistication. The fake notes have different serial numbers, indicating that they have not been printed from a scanned image of a genuine note by using coloured scanners and printers, but have been printed on a large scale at a security press with advanced technologies and specialized paper, inks and other materials.
Indeed, the problem is now so widespread that the Reserve Bank of India (RBI) regularly brings out circulars on how to identify counterfeit currency notes, as well as notifications of fake series in circulation.
Counterfeit currency has long been recognized as a source of funding for terrorism in India. Specifically, investigations into at least three cases — the Hyderabad bombings of August 2007; the attack on the Indian Institute of Science in Bangalore in December 2005; and the 26/11 terror attacks on Mumbai — have demonstrated such a link. In the first case, in the immediate aftermath of the explosions, the Police had arrested a four-member gang including a Dubai national. The police recovered fake currency of R 23.6 million. The Police Commissioner disclosed that FICN in the denominations of R 500 and R 1,000 had been brought in from Pakistan via Dubai. Intelligence sources found that R 3 million of the R 5 million spent on the attack on the Indian Institute of Science in Bangalore in December 2005 was obtained through the fake currency racket. In the Mumbai 26/11 attacks, a significant part of the money to fund the preliminary operations was obtained through fake currency rackets and hawala (illegal money transfer) channels. In May 2011, in its second charge sheet in the 26/11 case, the US government named a serving ISI officer, Major Iqbal, as a key conspirator charged with providing funds to Pakistani-American Lashkar-e-Toiba (LeT) operative David Coleman Headley. Major Iqbal, posted in Lahore during 2007 and 2008, was handling Headley on behalf of the ISI. He provided USD 25,000 and fake Indian currency notes to Headley, to meet the latter’s expenses during surveillance operations in India preceding the 26/11 attacks.
Indigenous terrorist outfits have also been provided FICN funding from Pakistan. In one such case, the Maharashtra Anti Terrorism Squad (ATS) told a Special Court in January 2009 that it was probing the links between the Indian Mujahideen (IM) and fake currency rackets in the country. The ATS submitted before the Special Court at Shivajinagar that Riyaz Bhatkal, Iqbal Bhatkal and Ahmed Yasin, founders and top operatives of the IM, had provided counterfeit notes to Maulana Hussain Shabbir Gangavali (29), who was arrested on December 30, 2008, at a Janwadi Masjid in Pune with FICN worth R 25,000.
As has been noted elsewhere,
Finances for… all Pakistan-backed Islamist terrorist groupings - are provided via tacit state support, including the transfer of large quantities of fake Indian currency that Indian Intelligence sources contend, on the basis of interrogations of arrested terrorists and couriers, is printed at Pakistani Security Presses at the Mlair Cantonment in Karachi, and at Lahore, Quetta and Peshawar, and which Pakistan uses to finance its jihad against India. Significant in this regard is the Indian government's August 2009 announcement that it intends to take up the issue of the importation of currency standard ink and paper by Pakistan from the UK, Sweden and Switzerland, with various international agencies, including Interpol. In addition to very substantial seizures of fake Indian currency notes (FICN) from Pakistan-linked couriers, there have been instances of such currency also being recovered from Pakistan Embassy staff. India's Ministry of Home Affairs has reportedly found that "the ISI has managed to get access to the configuration, specifications and other secret codes of the genuine Indian currency notes from six European companies that supply Indian currency papers fitted with security features, and another company in Switzerland that supplies the security ink used in printing these currency notes in India."
A Central Bureau of Investigation (CBI) report to the Finance Ministry has reiterated the claim that Pakistan government Printing Presses in Quetta, Karachi, Lahore and Peshawar, were churning out large quantities of FICN. Reports indicate that the paper for the fake notes is sourced from London. Indian investigators also believe that the Pakistani government imports currency-standard printing paper far in excess of official needs. The extra quantum is handed over to the ISI for FICN production.
In November 2010, reports suggested that India had decided to raise the charge of printing and circulating FICNs against Pakistan at various international fora. According to government sources, armed with concrete evidence against Pakistan, India would first approach the Financial Action Task Force (An inter-governmental body whose purpose is the development and promotion of national and international policies to combat money laundering and terror financing). The matter would subsequently be raised with the World Bank, IMF and Interpol as well.
India’s FICN problem received international attention when the International Narcotics Control Strategy Report, 2011, of the US State Department confirmed that India faced an increasing inflow of counterfeit currency, produced primarily in Pakistan, and that terrorist and criminal networks used this money to finance their activities in the country. “India faces an increasing inflow of high-quality counterfeit currency, which is produced primarily in Pakistan but smuggled to India through multiple international routes," the Report noted. Further, criminal networks exchange counterfeit currency for genuine notes, which not only facilitates money laundering, but also represents a threat to the Indian economy.
The ISI pushes large chunks of FICN into India directly from Pakistan, as well as through Nepal, Bangladesh, Sri Lanka, Malaysia and Thailand. Pakistan International Airlines (PIA) has been used to transport counterfeit currency to conduits in Nepal, Bangladesh and Sri Lanka. The modus operandi was revealed by two Nepali counterfeit currency traffickers who were arrested by the Thailand Police in October 2007. During interrogation, the accused disclosed that they were working for a prominent Nepali businessman. Nepal has long been used for this ‘trade’, so much so that the possession of any high denomination Indian currency note (R 500 and R 1000) is prohibited in the country. Significantly, in one of the earliest cases confirming official complicity, a Pakistani diplomat, Asim Saboor, Assistant Secretary at the Pakistani Mission in Kathmandu, was caught by the Nepali Police in the act of conducting a transaction with FICNs, and was found distributing counterfeit Indian banknotes on January 3, 2000. He was summarily expelled from Nepal.
The Uttar Pradesh (UP)-Bihar border with Nepal is the most prominent route for the inflow of fake currency from Nepal into India. After the neutralization of an FICN racket in UP in 2010, interrogations revealed that the gang employed a set of six women couriers from Champaran in Bihar and another set of four hailing from Nepal. The FICN travelled to Uttar Pradesh from Nepal along two routes: from Nepal to UP via Bihar, and directly to UP, particularly through the Siddhartnagar and Maharajganj routes. The gang used private vehicles to cross the Nepal border, while the rest of the movement was done principally on public transport. To minimise suspicion, women couriers, particularly those with young children, were preferred within India, and were paid two per cent of the total face value of the FICN. A male shadow was used to trail the couriers to ensure that they were not trapped by the Police. FICN of R 1,000 denomination was bought in Nepal at the rate of R 500 to R 600, while the R 500 denomination note was bought for R 300 to R 400 each.
The Rajasthan and Punjab borders are the other corridors through which Pakistani agents push fake currency into India. Following a Police raid on an ISI cell in Delhi in 2011, the arrested operatives revealed that the Thar Express, running between Munnabao in Pakistan and Jodhpur in Rajasthan, was being used to smuggle FICN into India. Fake currency to the extent of INR 3.3 million was seized from them. They also confirmed that the Indian currency was printed in Pakistan and illegally pushed into India through Nepal, Bangladesh, Sri Lanka, Malaysia and Thailand.
FICNs are also flown in from Dubai, with the crime syndicate, D-Company, headed by Dawood Ibrahim, playing a prominent role. The D-Company has been identified as a criminal-terrorist syndicate by the US Congress, and is on the Interpol’s wanted list for organized crime, counterfeiting, and terrorist activities. D-Company operations in Dubai are run by two key lieutenants — Aftab Bhakti and Babu Gaithan. The money is transported to India through regular flights, with ordinary passengers. Indian workers from Dubai are specifically targeted, and are paid the value of a return ticket that enables them to travel home, in exchange for carrying a consignment. From Dubai, the fake currency consignments reach two major transit points — Mumbai and Hyderabad. The fake currency is offered to crime networks throughout India at a 1:2 ratio of original currency to counterfeit currency.
Sea-borne consignments are also delivered to Tamil Nadu (from Sri Lanka) and Gujarat (from Pakistan).
Local criminal networks are also used for distribution. In Rajasthan, for instance, fake currency operations are closely linked to satta (gambling) and opium smuggling. In one case, Asghar Ali, arrested at Ahmadabad in Gujarat in 2009, confessed to operating as a contact point for those who sought to get into the FICN business, and facilitated their contacts with agents who would arrange for the delivery of FICNs against hawala payments, from Dubai and Pakistan. He confessed to linkages with Pakistani intelligence agencies as well.
To tackle the challenge of this new security threat in a coordinated manner, India’s Ministry of Home Affairs, in March 2011, asked States to step up their drives against FICNs. States were asked to share a copy of the forensic report on the seized and recovered FICNs with the Intelligence Bureau (IB) and the RBI. The States were also asked to set up a committee headed by the Directors General of Police, with General Managers/Deputy General Managers of the RBI, officers of the intelligence branch of the State Police, and the Criminal Investigating Department of the State Police, as members. A home ministry official, on condition of anonymity, disclosed, “States have been asked to designate a Police Station at each District Police Headquarters as the nodal Police Station wherein the offences relating to FICNs recovered by banks can be reported. The banks will also correspondingly designate a nodal officer in each of the districts in their respective banks. These officers will be vested with the responsibility of reporting the seizures of the FICNs.”
States have been asked to evolve an efficient system of registration of cases, crucial to enable both proper investigation and a comprehensive database for a meaningful action to get to the sources of the proliferation of FICNs. The National Investigation Agency (NIA) has also been empowered to probe and prosecute cases relating to FICN related offences under various provisions of the Indian Penal Code. The Centre has nominated the CBI as the Nodal Agency to monitor investigation of fake currency note cases. The RBI has also strengthened the mechanism for detection of counterfeit notes by the banks.
Despite these various measures and a progressive recognition of the problem by international agencies and foreign powers, FICN inflows into India remain uninterrupted. With Pakistan’s unrelenting commitment to the anti-India ‘jihad’, India is yet to find an effective foil to neutralize this tool of economic terrorism, even as it struggles to cope with Pakistan’s terrorist proxies operating on its soil.
Shrideep Biswas is Research Assistant, Institute for Conflict Management. Courtesy the South Asia Intelligence Review of the South Asia Terrorism Portal.