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Funding terror

Shalini S. Dagar     December 11, 2008

Terrorists at least cannot be blamed for not getting the maximum bang for their buck. With relatively small funds, they plot events that have global repercussions. The Mumbai attacks gave the terrorists free “airtime” on television channels across the world. Yet, how do they manage to fund their activities? Well, terrorists find many sources of money—and, surprisingly, quite a lot of it is legitimate.

In South Asia, the heroin and drug trade is one major source of terrorist financing. Rachel Ehrenfeld, the well-known author of books on terror financing and corruption, who is also Director of the American Center for Democracy, says: “Serious money that created the basis and spread the radical Islamist ideology comes from Saudi Arabia and the Gulf, through the banking system as legitimate and laundered money, and through charities.”

She says some of the money routed to legitimate businesses in the region from Saudi Arabia and the Gulf is often diverted to local organisations and Islamic centres. Some of these centres are believed to become training grounds for foot soldiers like Azam Amir Kasav, the terrorist caught in the Mumbai attacks. Former Union Law Minister Arun Jaitley, who has been a staunch votary of monitoring foreign funding of NGOs and charities in India, says, “we must maintain a strict vigil”.

There is a glimmer of hope, though: in one of the largest prosecutions of terror financing, leaders of the Holy Land Foundation, one of the largest charities in the US, were convicted in the US, a day before the Mumbai terror attacks.

Ehrenfeld is not impressed by the Holy Land case. She calls it a victory too little and too late, and says today’s threats call for better indicators, better identification and faster action. “The HLF was already known in 1993 as a Hamas front organisation. Yet, it took the 9/11 attacks in 2001 for the US to outlaw it, and seven more years to shut it down. Most of all, what is needed is the political will for serious commitment to implement anti-terror financing policies, and the courage to openly identify the sources behind terror financing,” she says.

India is yet to make any progress in identifying such sources. A Financial Intelligence Unit (FIU) to probe such money trails was set up in 2004. Stringent Anti-Money Laundering (AML) and Know Your Customer (KYC) guidelines for banks and financial institutions are also in place (It now seems that the two dozen-odd credit cards retrieved from the terror sites were of hostages). Arpinder Singh, Executive Director, Advisory and Forensic, KPMG, says it is imperative that AML data be monitored more intelligently.

Clearly, there are many strands to follow in this chase. Even if it is not possible to cut off all the funds headed for terrorist organisations, it is certainly possible to choke the supply lines.

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