INTRODUCTION

India and its state possess a very unique and distinctive blend of conflict routes and the concept
of peace that prominently have a great impact on the countries policies and execution of such
policies. This is a true fact that because of its policies and the comebacks country faces in the
form of external aggression like terrorism which is spreading into the country through its
absorbent border lines and the fear of internal disturbances mainly happening dude to fragile
governance policy.1 The central political system of our country totally leaves the regulating and
controlling responsibility on the shoulders of states.2 This leads to the spreading of virus of
corruption in their own intelligence and counterterrorism units. The forces especially the local
police force are often not equipped with latest arms and ammunitions, they are not trained
properly to combat the recent types of terrorist attacks.

We have seen a noteworthy internal chaos in our country. Whenever our police and security
forces deals with the present threats of terrorism they often fail because of the high
fragmentation and poor coordination among them.3 The foreign aided attacking threats take
advantage by merging with a disturbed internal situation of our country which abets them to
create levels of radical movements inside our country which demands fundamental changes in
various governmental policies. India has been going through a tough time since independence for
facing and combating terrorist attacks and had always been a main target for the terrorist groups.
Experts rightly stated India’s situation as the “Epicenter of global terrorism”.4 Due to
unfortunate reasons India continues to remain a chronic victim of terror due to its geographical
location, where Pakistan and Afghanistan infiltrate from west and China from east.

Though there is no proper official compilation about the various terrorists group operating in
India, but a very commendable work has been done by the Delhi based “Institute for Defence
Studies and Analysis (IDSA)” few years back published a book ‘MILITANT GROUPS IN
SOUTH ASIA’ which pointed out 39 terrorist outfits scattered in different parts of India.5 The
list also pointed out various groups which operate out from Bangladesh and Pakistan. There
should be an up gradation of the list which should include ISIS and Al-Qaeda; two of these
groups have announced their setting up of secret operating cells mainly in the South-Indian
states.6 These cells usually do the work of recruitment from India by instigating the youth mainly
Muslim youth who are been deprived from basic necessities like scarcity of proper jobs and are
often victims of communal riots due to their minority status. This article will point out few main

1
Ashley, Sean Paul. "The Future of Terrorist Financing: Fighting Terrorist Financing in Digital
Age." Penn State Journal of International Affairs 02, (Apr 5, 2012)
2
FATF Report. “Anti-Money Laundering and Combating Financing of Terrorism in India” (Jan 25, 2012)
3
Jean-Charles, Brisad . “Terrorist Financing : Roots and Trends of Saudi Terrorism Financing.” (December 19.
2002)
4
Vivek Chaddha, “India's Counterinsurgency Campaign in Mizoram” (Feb 23, 2010)
5
Indian Embassy, “Speech by National Security Adviser Mr. M.K Narayanan atthe 43rd Munich Conference on
Security Policy” (March 12, 2015)
6
FATF Analytical report “Trade Based Money Laundering” (June 23, 2006)
sources from which these terrorist groups generate funds to carry out their terror business. The
article will also show the transfer mechanism that has been adopted by this terror group

FINANCING OF TERROR
It is very crucial for the terrorist organizations to operate and survive simultaneously with
effective planning of everything they deal with. Some of the important sectors where these
groups has to concentrate, these are

1) motivation by the ideologies of the group

2) Infrastructure of these terror groups with ongoing mechanism of continuous recruitment
3) International/provincial mobility
4) Access to weapons, arms and explosives
5) The main point above all is continuous and stable source of finance 7
From the above mentioned criteria the availability of assured and stable flow of finances is the
most complex and most critical links in this whole system which endures terrorism throughout
the world in a large scale. As stated by former US Secretary Collin Powel “Money is Oxygen for
terrorism”. If we want to take a look on the other side of the coin then a very similar statement
has been given by the key Al-Qaeda leader based in Afghanistan named Sheikh Saeed who said
in an interview that, “foremost need is financial”. He also added, “There are hundreds of people
willing to carry out martyrdom and seeking to be the part of such operations, but they can’t find
to equip themselves”8

It is very clear from the above stated facts that finance is the essence of terrorism .It is the blood
which flows through the nerves of the complex terrorist nervous system and helps it to survive
and grow. Mainly, the terrorist groups and organizations has a very wide range of de-centralized
network which is often self-directed by the key members, this network helps in mobilizing funds
to bear there various needs and demands like organizational expenditures which creates and
upholds the complex infrastructures which are extensively dispersed, recruiting and upgrading
new terrorists, logistics, spreading of propaganda, training and grooming of new recruits,
weapons and arms/explosives, indoctrination and various war activities. But the most important
factor is funding of terrorist activities and operations. It is quite clear from the above mentioned
points that perpetrating any particular terror outbreak doesn’t required as much funding as whole
organization needs for its activities. To support this view the following facts will show a brief
estimate of finance of some major terrorist attacks since the attacks of 9/11.9
1. The attacks of 9/11 (World Trade Center and Pentagon) on 11th Sept 2001 whose
estimated cost in US dollars/British pounds was around $40,000

7
Financial Intelligence unit. “Overview of FIU-IND Financial Intelligence Unit, Ministry ofFinance, Government of
India” (March 17, 2015)
8
Haken Germy. “Transnational Crime In The Developing World” Analytical report (Feb 4, 2011)
9
Govt. of India ,Group of Ministers “GROUP OF MINISTERS' REPORT ON "REFORMING THE
NATIONAL SECURITY SYSTEM” (May 23, 2001)
 2. The attacks of London Transport System on 7th July 2005 whose estimated cost in US
Dollars/British pounds was around $8,000
3. Madrid train bombings on 11th March 2004 whose estimated cost in US Dollars/British
pounds was around $10,000
4. Istanbul truck bomb attacks on 15th & 20th Nov 2003 whose estimated cost in US
Dollars/British pounds was around $40,000
5. Jakarta JW Marriot Hotel attacks on 5th Aug 2003 whose estimated cost in US
Dollars/British pounds was around $30,000
6. The Bali bombing attacks on 12th Oct 2002 whose estimated cost in US Dollars/British
pounds was around $50,000
7. The US Cole attacks on 12th 2000 whose estimated cost in US Dollars/British pounds was
around $10,000
8. The bombing on East Africa Embassy whose estimated cost in US Dollars/British was
around $50,00010

If we talk about terror financing in Indian context then we should talk about the most heinous
and dreadful act of terrorism that our country faced in recent past. The Mumbai attacks of
November 26, 2008 or we can say the attacks of 9/11. Intelligence Bureau(IB) had published
a report after investigating the whole case and concluded that for the above mentioned
attacks an approximate sum of Rs 1,17,37,800/- were spent by the Pakistani based state
sponsored terrorist group Lashkar-e-taiba headed by Hafiz Saeed to execute the attacks
successfully. IB further pointed about the other body formed by Hafiz Saeed and Zafar Iqbal
known as Jamad-ud-Dawah was collecting “zaquat” from every Muslim citizen and were
diverting the money towards laskhar-e-Tayiba for executing this attack. “Zaquat or Zakat is
the payment annually paid under Islamic law on certain kinds of property and used for
charitable and religious purposes”. It is one of the five pillars of Islam. It’s been reported
that JuD recruited a man force of 50,000 personnel for executing the attacks of 9/11.11 The
dossier which was produced by IB was reported on the basis of the statement given by the
Pakistani-American Lashkr-e-Taiba terrorist David Headly who was caught by FBI and other
information through different credible sources. The total amount which was spent for the
attacks was segregated into various sectors for proper coordination and efficiency. Around
$1, 30,000 were spent in helping the families financially and for the training of forces. IB
further stated that $25,000 were spent on weapon by LeT along with this $500 USD were
spent on opening a “VOIP (Voice-Over Internet Protocol)” whose purpose was to
communicate through satellite based communication system during the execution period of
the attack. Headley confessed his guilt and gave a statement that he individually got $40,000

10
Id pg. 1, 2
11
Id pg. 1, 2
 dollars for conducting and leading surveillance visits in India along with other sleeping cells
that were active during the attacks.12

The above mentioned financial estimates clearly show that a majority of funds were needed
by the terrorist organizations for maintaining and raising their network as well as in
infrastructure. The most effective solution to this issue is to stave them completely of the
funds availability at two of the main stages which are fund generation stage and the
movement or channelizing stage.13

The very first things we need examine are the sources from where the terrorist organizations
generate fund. As per the details which are available in public domain by the listed
information in the book “Militant Groups in South Asia”, each and every terrorist groups
resorts to different ways to generate and funds. It totally depends on the reach, support base
and capability of the organization. The sources can be classified into three broad categories.
The first source includes fund raising from state entities or any other structural form which
can generate funds and will ensure its long term availability. The second is known as ‘self-
funding” through different local network made by them. The third source of funding involves
“revenue generating” activities like executing low level criminal offences such as legitimate
business, donations and organized crimes.14

Apart from the above mentioned approach of classifying sources of finance a different
approach could be adopted for identifying the sources under two heads, first is from
‘Domestic sources’ and second ‘External sources’. Regardless of the various forms of
classification adopted, it’s a widely accepted fact that majority of the fund for the terror
organizations come from local charities, contributors, donations, foreign collections,
protection money, extortion, financial aid by state entities, ‘Zakat’ collections, diverting
funds from different charitable and non-governmental organizations , criminal activity
proceeds, gun mafias, drug trafficking from different types of inter-border crimes,
counterfeiting currencies, investment in different local trades, real estate business and hosting
other illegal activities.15

12
Institute of Peace and Economy. “Global Terrorism Index Report Measuring and Understanding the Impact of the
Terrorism” (Feb 5, 2012)
13
Institute of Economy and Peace. “Global Terrorism Index Report: Measuring and Understanding of the Impact of
the Terrorism” (Feb 17, 2012)
14
Ved Marwah. “India's Counterinsurgency Campaign in Punjab” (Jan 23, 2008)
15
Ministry of External Affairs, Govt. of India. "Fact Sheet on Jammu & Kashmir - In focus article” (May 20, 2012)
 MOVEMENTS OF FUNDS
The main crux of the funds movement is smooth, easy and on time transfer with highest
security and the ability to deny, these things are of utmost importance for every terrorist
organization to function in a successful and effective way. These groups can largely achieve
their agendas through these three main methods or through combination of these methods.
The three methods are:

1. Transferring funds by using financial method which includes movement through

hawala transactions or other similar kind of illegal mechanism. Basically is the
transfer of bulk money informally.
2. Physically moving the funds by using cash couriers
3. Involving international trade system in Diamonds and Gold which are usually high
valued items through laundering 16

While tracking and monitoring high value dealings and the sources of generating of illegal funds,
World Bank a global financial institute estimated that size of illegal money generated throughout
the world is tremendously high and probably higher than the “Nominal World GDP”. Global
GDP and economy are rising constantly and one can notice extensive growth from past two
decades. With this kind of growth the scale of money laundering has also increased.

Transferring and generating funds through various high profile methods along with other low
profile illegal industries are used to raise fund for terror. Few of the means from where funds are
generated are listed below along with their probable valuation.

1. Drugs trafficking - $320 Billion

2. Humans trafficking- $31.6 Billion
3. Wildlife Trafficking- $7.8-10 Billion
4. Counterfeiting currency- $250 Billion
5. Human organs- $614 to $1.2 Billion
6. Light weapons and Small arms- $300 Million to $1Billion
7. Oil mafia- $10.8 Billion
8. Diamonds and gemstones- $860 Million
9. Timber mafia- $7 Billion
10. Illegal fish Trade- $4.2 to $9.5 Billion17

It is quite obvious that this kind of trading raises a great amount of profit for all the participants,
making terrorism financing and money laundering different from each other. This concept should
be clearly shown because not all illegally raised fund transaction through these illegitimate paths

16
Narendra Modi. “Statement by H.E.Narendra Modi, Prime Minister of India, General Debate of the 69th Session
of United Nations General Assembly” (March 24,2015)
17
Id pg. 2,3
are used in terrorism financing. It is also possible that apart from the above mentioned methods
other innovative methods can also be used to generate funds.

Money Laundering Terrorism Financing

Placements of Funds

Layering

Integration

Channelizing Funds (only

difference between money
laundering and terrorism
financing)

(The above diagram shows the basic difference between Money laundering and Terrorism
Financing)

The above diagram clearly shows the difference between Money Laundering and Terrorism
Financing. The last step is the channelizing stage where the funds are channelized towards
various illegal activities. It is not always necessary that the fund generated through money
laundering shall be used for Terrorism activities. Money laundering is a broader concept which
says that illegally raised funds can be used in other illegal activities apart from terrorism. But
terrorism financing is a specific concept which says that illegally raised funds from various
legitimate and illegitimate sources can only be used for terrorism.18

18
V. Balachandran and Ram Pradhan. “High Level Enquiry report on 26/11” (Apr 10, 2008)
 MONEY LAUNDERING
There are multiple ways to launder money. One of the most common methods is to open multiple
bank accounts in different banks, merging legally acquired assets with illegal proceeds,
channelizing funds through difficult and complex legal structures and buying of cheques from
banks against cash. For inter border organized crimes the strategies that are adopted to
camouflage the illegal source involves the use of trade and offshore establishments based
laundering of money. Maximum countries which face terror threats have built their own
mechanisms for interstate cooperation as well as coordination at both operational and policy
levels to recognize latest emerging tendencies and to articulate suitable comebacks.
FATF(Financial Action Task Force) defined Money laundering in the context of terror financing
as “the process of disguising the proceeds of crime and moving value through the use of trade
transactions in an attempt to legitimize their illicit origins” 19

Money laundering has a very globalized and complex reach, for the law enforcing agencies it is
extremely difficult to detect and enumerate the chain of links which starts from funds generation
till the utilization of these funds in terrorism. Extensive research needed to detect such crimes
and there should be an excellent coordination between domestic and international regulatory, law
enforcement bodies and intelligence agencies who deal with such issues. There are few cities like
Frankfurt, Singapore, Amsterdam, Bangkok, Kuala Lumpur, Dubai and probably few Latin
American cities as well who the major targets for drug money laundering are. Apart from these
big markets illegal funds raised through real estate business also heavily contribute to the huge
bulk of funds generated through laundering business and make the bulk thicker. 20

CHALLENGES FACED BY INDIA IN COMBATING TERROR

FINANCING
Age of assets for fear and its development from fluctuated sources to the last goal includes
different complex procedures and in this way countering or controlling financing of fear
represents an intense test. India faces fear based oppressor challenges from inner and additionally
outer state and non-state performing artists. Its monstrosity can be surveyed by the way that,
regardless of all endeavors, psychological oppressor exercises expanded by 70 for each penny in
the vicinity of 2012 and 2013 (Institute for Economics and Peace, Global Psychological warfare
Index Report Measuring and Understanding the Impact of the Terrorism 2014) and number of
passing’s additionally recorded increment from 238 to 404. As indicated by the worldwide
psychological warfare file report of 2014, at exhibit 43 distinctive fear monger gatherings are
operational in antinational exercises crosswise over India. These are ordered into three

19
P.Ramdas. “Mumbai blast accused was having free run in Kerala: NIA” (Nov 06, 2012)
20
Dattatray B Shekatkar. “India’s counterinsurgency campaign in Nagaland” (Routledge 2009)
gatherings; Islamists, Separatists, and Communists or naxals (Institute for Financial matters and
Peace 2014).21

While developing an extensive approach for fighting stream of dread back, ID of the wellsprings
of fund and its ambit is the principal basic step. There are three essential sources, both interior
and outer, for financing psychological warfare. Initially source includes the money related help
from state elements or structures with huge hierarchical set up which can produce the assets and
guarantees its accessibility with all help. Second source is self-financing and envelops 'income
creating' exercises, for example, criminal exercises from low level misrepresentation to all
around arranged wrongdoing and assets raised through gifts and real business could constitute
the third. Agitators and psychological oppressor turn to a few of these techniques to fund their
activities against India. Their principle wellsprings of financing are:

1. “State Sponsored (such as ISI), funding generated from narcotics with the help of
terrorist organisations like Lashkar-e-Taiba, Hizbul-Mujahideen and it is in the
range of million dollars (Embassy of India, Washington D.C. 2007)”
2. “Contribution from religious, fundamentalist, Pan Islamic terrorist organisations
based in Pakistan who raise their funds before Eid-prayers and through Zaquat3.
[Zaquat is one of the five pillars of Islamic traditions and is compulsory
sanctioned method of alms giving in Holy Quran (Brisard December 19. 2002).]
The holy meaning of the process is often misinterpreted by radical elements and
under the name of Jihad, It is often used as a channel for spreading terror and is
utilized through various means in the countries like India (Jihad 2013). As much
as US$ 100 million was generated was reportedly collected in Karachi itself at
one time (Ministry of External Affairs 2002”
3. “Contributions from charitable organizations mainly in Pakistan and Saudi
Arabia”.
4. “Trans-national transactions from trans-national criminal groups or mafia group
such as one led by Dawood Ibrahim”
5. “Money collected voluntarily or otherwise in the form of extortion or kidnapping
etc.”
6. “Narcotics smuggling and gun running”
7. “Fake Indian currency notes”
8. “Stock market operations by manipulating stock market”22

In light of examinations and cross examination reports of fear based oppressor/activists amid the

21
Id Pg. 1,2,3,4
22
Id Pg. 2,3,4
Punjab emergency and militancy in J&K, the three noteworthy wellsprings of psychological
militant financing recognized for stream of assets were through trans-fringe dispatches, cash sent
through hawala exchanges and direct illicit settlements from outer supporters also, sympathizers.
Utilization of various directing channels regardless, the ISI association/complicity was close
aggregate.23 Utilization of medication cash, fake money what's more, different apparatuses of
dread financing got coordinated with the above at the appointed time.24 As far as the eastern
performance center was concerned, dread financing bundle additionally included neighborhood
level blackmail and security cash. To manage the intricate issue adequately it is vital to nearly
screen both the viewpoints i.e. age of assets and its acceptance/dissemination. Legitimate limit
building, fortifying legitimate arrangements, setting up money related administrative and
knowledge units, law authorization and legal capacities, would all be able to contribute
altogether in fighting fear based oppressor financing. The worldwide group can likewise help
through better observing of their money related frameworks against manhandle by fear based
oppressor financers around the globe regardless of the objective of dread exercises. The checking
of financing of psychological oppressor exercises in India came into more honed center post
Kargil war. The suggestions of the powerful Group of Ministers headed by the then Deputy
Prime Minister and Home Minister Mr. L K Advani. The gathering suggested particular
enactment against financing of psychological warfare (Group of Ministers May 23, 2001). It
might be noticed that the issue of fear financing draws in arrangements of a large group of
enactments including:

1. “The Unlawful activities (Prevention) Act – 1967.

2. The prevention of money laundering act – 2002.]
3. Foreign exchange management act – [FEMA] 1999.
4. Conservation of Foreign Exchange and Prevention of Smuggling Activities Act – 1976”

REGIONAL AND GLOBAL EFFORTS-

Since the danger of fear mongering is worldwide, unnecessary to repeat that it needs well-
coordinated worldwide exertion for compelling handling. In compatibility of its aggregate
responsibility regarding battling fear mongering, India is connecting with the universal group
looking for exceptional participation. India has reinforced its abilities in relationship with the US
offices different local associations that are also focused on anticipation of illegal tax avoidance
and fear monger financing. A portion of the activities are;

1. “India-U.S. Economic and Financial Partnership Dialogue established under a

Memorandum of Understanding signed in January (2015)”

23
US Department of States. "Anti-Money Laundering." US department of States; Diplomacy in
Action. n.d. http://www.state.gov/j/inl/c/crime/c44634.htm ( March 18, 2018).
24
World Bank. "Gross Domestic Product 2010." worldbank.org. 2010.
http://siteresources.worldbank.org/Datastatistics/Resources/GDP.pdf (accessed March 23, 2018).
 2. “India is also consistently urging the UN member states to adopt a global terrorism
treaty”
3. “At SAARC, India has urged the member states to actively cooperate on the issue of
financing of terror as SAARC countries have already accepted the International
Convention for the Suppression of the Financing of Terrorism of1999 and UNSCR 1267”
4. “It can also be facilitated through inter-government originations such as Global Financial
Action Task Force and Asia-Pacific Group on Money Laundering”25

CONCLUSION
In the Indian setting most of the work relating to countering dread financing has been locale
and substance particular, for example, in Punjab, North East, opiates and medication
trafficking, financing of naxal development and so forth. It shows up, in any case, that
extremely restricted work has been completed regarding the matter of dread financing in its
totality that would incorporate every single related issue, for example, subsidizing assets,
layering of assets, coordination of assets and appropriation through different channels. In the
present setting, broad utilization of innovation enables cash to move anyplace on the planet
without hardly lifting a finger making the undertaking of fighting money laundering and fear
based oppressor financing more critical and more troublesome than any time in recent
memory to track. Not just in India, knowledge and security organizations the world over have
been attempting consistently to ponder this threat however just with incomplete
achievement.26 As clarified before fear financing keeps running over a budgetary system,
which is consistent and rises above topographical limits, utilization of numerous laws and
administrative system in various nations, which are frequently perplexing in nature
furthermore, give lacunae in their understanding. It is likewise recognized that fear financing
system has been developing quicker than the endeavors of the law authorization
organizations and counter-fear based oppression offices. These now incorporate even
electronic exchanges in business, 'advanced washing', expanding utilization of computerized
cash and so forth

Unnecessary likewise to state here that a successful and far reaching counter-dread financing
methodology ought to envelop all the central components related with the mechanics of
financing of fear mongering and plan to develop the abilities as needs be. It should start with
contextualizing the risk investigation and structure to alleviate those dangers. The
multifaceted nature of its inclination supports the need to take after a double track approach
covering an all-encompassing evaluation alongside improvement of limit situated procedure
fortifying law upholding offices to handle a wide range of test. Handling psychological
oppression of all assortments with all earnestness is totally in escapable for India which has

25
Sharma, S. K., and Behra Anshuman. “Militant Groups in South Asia”. New Delhi: Institute for Defence Studies
and Analyses and Pentagon Press, 2014.
26
Shapiro, Ari. "Obama Stays the Course on Terrorist Financing9, accessed 3/20/09, pp. 1-4 available at -." npr.org.
March 11, 2009. http://www.npr.org/templates/story/story.php?storyId=101676777 (accessed March 20, 2015)
been its casualty for a long time. Arranged in a locale that has been depicted and assigned as
the 'epicenter of worldwide psychological warfare', India critically necessities to rethink its
methodology to manage worldwide fear based oppression by building up a exhaustive
national security design including definition of a exhaustive national approach on
psychological warfare. It must perceive that demonstrations of fear can't be battled scarcely
as a lawfulness issue. What India needs is a more thorough and comprehensive approach that
mixes diverse key components to shape a sound counter-dread technique. A thorough and
viable legitimate structure to manage all parts of psychological oppression should be
sanctioned. The law ought to have satisfactory shields to keep its abuse.

Handling fear based oppression of all assortments with all reality is totally in escapable for
India which has been its casualty for a long time. Arranged in a district that has been depicted
and assigned as the 'epicenter of worldwide fear based oppression', India critically necessities
to rethink its methodology to manage worldwide fear based oppression by building up a far
reaching national security engineering including detailing of a far reaching national strategy
on psychological oppression. It must perceive that demonstrations of fear can't be battled
scarcely as a peace issue. What India needs is a more far reaching and comprehensive
approach that mixes distinctive key components to frame a solid counter-dread procedure. A
complete and successful lawful structure to manage all parts of psychological oppression
should be instituted. The law ought to have sufficient protections to keep its abuse.

A critical part of patching up and rebuilding of the counter-dread technique ought to

reinforce of the knowledge abilities on high need. The security organizations should be
empowered, both physically and through lawful strengthening to forestall, pre-empt and
manage fear monger strikes. Without totally repeating the US or some other model created in
different nations yet taking these as great beginning stages, it is time India solidified its
approach on setting up the prematurely ended National Counter Terrorism Center.
Unnecessary further to include here that the National Counter Terrorism Center in its
modified shape, at whatever point set up, sooner the better, must have a devoted unit to
manage financing parts of dread. In any case, most importantly, India should as a country,
develop The 'National Will' to manage the threat of psychological oppression an unflinching
and joined way. In the US post- 9/11 and somewhere else also, aside from changing/patching
up their security and insight engineering to address the new difficulties, their administrations,
the general population the media and the informal organizations, have demonstrated
exceptional soul of national solidarity also, unfaltering will to successfully manage this.
Tragically, this does not appear to have occurred in India where the administrations, the
political gatherings and the general population stay separated because of different sectorial
contemplations. We have to think genuinely about this and demonstration, since all these
ought to be feasible and must be endeavored previously another 26/11 hits us.