India’s Efforts to Counter Terror Financing

Context

India has intensified its efforts to combat terror financing and actively has interacted with international financial institutions to scale back the misuse of such funds in helping terrorist activities.

Key Highlights

• India is urging institutions just like the International Monetary Fund (IMF), World Bank, and Asian Development Bank (ADB) to study their financial useful resources to Pakistan to ensure that development finances are not diverted towards financing terrorism.
• India is advocating for Pakistan’s re-entry into the Financial Action Task Force (FATF) gray listing, emphasizing the need for stringent monitoring of its economic structures to prevent terror financing.

Terror Financing

• • Definition: Terror financing involves the availability of funds or financial support to individual terrorists or terrorist agencies. These finances can originate from each legitimate and illegitimate resource and are used to maintain terrorist operations, along with recruitment, training, and execution of attacks.

• Major Sources of Terror Financing:

• • Hawala Transactions: An informal approach of transferring money without physical movement, often exploited to fund terrorist activities.
  • Fake Currency: Circulation of counterfeit currency undermines the financial system and presents an untraceable fund for terrorist operations.
  • Drug Trafficking: Illicit drug trade serves as an extensive funding flow for terrorist organisations.
  • Extortion and Kidnappings: Terrorist organizations interact in extortion and abductions to extract funds from individuals and organisations.
  • Charitable Organizations and NGOs: Some entities are misused as fronts to acquire and channel funds in the direction of terrorist activities.

Challenges in Combating Terror Financing

• Complex Financial Networks: Terrorist agencies utilize state-of-the-art and decentralized financial systems, making detection and disruption tough.
• Lack of International Cooperation: Inadequate collaboration amongst countries hampers the global fight against terror financing.
• Legal and Regulatory Gaps: Variations in legal frameworks and enforcement competencies throughout countries create loopholes exploited by terrorists.
• Misuse of Technology: The rise of cryptocurrencies and digital payment systems gives anonymity, facilitating untraceable transactions.

India’s Measures to Counter Terror Financing

• Legislative Framework:

• • • Unlawful Activities (Prevention) Act (UAPA): Empowers the government to designate individuals and organizations as terrorists and seize their property.
    • Prevention of Money Laundering Act (PMLA): Provides for the confiscation of property derived from or concerned in money laundering.

• Institutional Mechanisms:

• • • Financial Intelligence Unit (FIU-IND): Analyzes suspicious financial transactions and disseminates data to enforcement agencies.
    • National Investigation Agency (NIA): Investigates and prosecutes offenses associated with terrorism and its financing.

• International Collaboration:

• • • Active participation in international forums like FATF and the “No Money for Terror” (NMFT) convention to enhance international cooperation.

• Technological Advancements:

• • Implementation of the National Intelligence Grid (NATGRID) to facilitate real-time data sharing amongst security agencies.

Source: The Indian Express

UPSC Mains Practice Question

Q. The scourge of terrorism is a grave challenge to national security. What solutions do you suggest to curb this growing menace? What are the major sources of terrorist funding? (2017)

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