BANGALORE - Their status might be illegal
and their operations shadowy, but terrorist
organizations are increasingly engaging in
legitimate business to fund their illegitimate
activities.
The latest US report on global
terrorism says that Pakistan-based terror groups
are raising funds by investing in legitimate
business. And Indian intelligence agencies are
finding that regular banking channels and wire
transfers are being increasingly used by
terrorists for sending funds.
According to the US State Department's
"Country Reports on Terrorism", in anticipation of
asset seizures by the Pakistani government the
Jaish-e-Mohammed withdrew funds from its bank
accounts and invested them "in legal business such
as commodity markets, real estate and production
of consumer goods".
The Jaish-e-Mohammed
is listed as a terrorist outfit by Pakistan, India
and the US. But it continues to operate openly in
Pakistan, the US report says. Its founder-leader,
Maulana Masood Azhar, was among the terrorists
swapped for the release of hostages taken during
the hijacking of Indian Airlines Flight 814 in
December 1999. Within weeks of his release, Azhar
set up the Jaish-e-Mohammed with seed money
provided by Pakistan's intelligence agency, the
Inter-Services Intelligence (ISI), and al-Qaeda.
It has carried out several attacks in India,
including the one on the Indian Parliament in
December 2001.
Indian intelligence
officials have been reported as saying that "the
Jaish-e-Mohammed and other jihadi groups are not
dependent on investments in business - legitimate
or otherwise - for funding their operations as
they continue to enjoy ISI patronage". However,
"they are investing in enterprises in which the
military has huge stakes".
Terrorist
organizations get much of their funding from
illegitimate business such as extortion, ransom,
human trafficking, drug running and so on. But
they have never shied away from legitimate
business, as it helps them launder funds. Often,
the businesses provide logistical support to the
organization's military operations.
In the
1980s, the Liberation Tigers of Tamil Eelam (LTTE)
of Sri Lanka set up an extensive network in the
southern Indian state of Tamil Nadu, including a
large number of legitimate business enterprises.
These included public telephone booths, travel
agencies, truck-transport businesses and
hospitals.
Of course, the money the LTTE
raised from these ventures seems small change
compared with the kind of profits it reaped from
business enterprises it set up in subsequent
years. Yet the role of these small businesses in
building the LTTE's military muscle cannot be
ignored.
Besides providing the LTTE with
finance, the small business ventures in Tamil Nadu
played an important role in building the
organization's logistics in the 1980s. While truck
services owned by LTTE supporters helped move
weapons, travel agencies provided fake passports
and hospitals took care of injured Tiger cadres
who were brought to Tamil Nadu for medical
treatment.
In subsequent years, the LTTE's
business operations grew beyond India to Southeast
Asia, then Europe and North America. From running
telephone booths in small fishing villages on the
Tamil Nadu coast, the LTTE's business operations
quickly grew to include ocean-going merchant
vessels. The LTTE's vessels carry legitimate
cargo, but they are also used to facilitate the
illegal international arms trade, including the
transporting of its own arms and military
equipment.
In February, Indian National
Security Adviser M K Narayanan said terrorist
outfits set up "legitimate business enterprises,
such as restaurants, real estate, shipping, etc
and utilize part of the proceeds to siphon off
funds for terrorist activities". He was speaking
at a Munich conference on security policy.
Drawing attention to the LTTE's "very
well-established network of legitimate businesses,
which provide both funds as well as logistics for
their activities", he pointed out that "jihadi
terrorist organizations have begun to follow
suit".
Narayanan also drew attention to
"isolated instances of terrorist outfits
manipulating the stock markets to raise funds for
their operations ... Stock exchanges in Mumbai and
Chennai 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," he said.
These comments sparked considerable
concern in India. Terrorists play the stock
markets not only to make money and to launder
black money, but also to trigger economic
instability in the target country. This is done
through manipulating the market by artificially
pushing up or down stock prices.
No names
or details were divulged by Narayanan or other
government officials. Praveen Swami, a noted
journalist who has written extensively on Islamist
terror in India, wrote that Narayanan was
apparently "referring to investments made by front
companies for three West Asia-based commercial
entities that the US believes have links with
Islamist terror groups". Citing intelligence
sources, Swami said, "India quietly terminated the
front companies' operations on the basis of
intelligence provided by the US. However, no legal
action was initiated, since no actual crime - like
market manipulation or fraud - had been
committed."
Intelligence officials do not
rule out the possibility of such outfits as the
Jaish-e-Mohammed or the Lashkar-e-Toiba using
their contacts in India to destabilize the Indian
economy by playing the Indian stock market.
While the involvement of terrorists in the
stock exchange remains a matter of speculation,
their "involvement in India's real estate business
is a fact", said a Research and Analysis Wing
(Indian intelligence) official. And this
involvement is "on a much larger scale than it is
in the stock market or other business ventures".
It is well known that the criminal
underworld has a huge presence in the real-estate
industry. Terrorists and their partners in the
underworld often work in tandem on real-estate
deals. They use strong-arm tactics and
intimidation to get people evicted from property
or to force them to sell it for a song. They pay
in cash, which enables them to launder money. They
register the property under false names, sell it
at an appropriate time and make a fortune on the
deal.
Underworld don Dawood Ibrahim is
believed to own property worth billions of dollars
in prime locations in Mumbai, India's commercial
and financial capital. His links with terror are
well established - he funded the 1993 serial bomb
blasts in Mumbai.
Besides investing in
legitimate business, terrorists use regular
banking channels to route their money. Besides the
usual hawala route to move money via
informal banking, "credit- and debit-card
transactions below the 'threshold requiring proof
of identity' [are] now being used to bring in or
access funds without attracting attention",
according to an article in Outlook, a leading
Indian newsmagazine. "The modus operandi,"
the article says, "is to send money in small
amounts, and thus slowly build up resources
instead of sending a large tranche of funds."
Two militants arrested in the southern
Indian town of Mysore last October had received
about US$15,000 in installments over a period of
four months. The money was transferred through
Western Union, a financial-services company based
in the US.
Officials of India's Financial
Intelligence Unit (FIU) are considering steps to
cope with the changing pattern of terror fund
channeling. With terrorists switching increasingly
to investing in legitimate business and routing
money through regular banks, officials are keen
that the Prevention of Money-Laundering Act, 2002,
is amended to make it more effective in curbing
the misuse of legal channels by terror outfits.
They have recommended that it
be made mandatory for international credit-card
companies to report to the FIU cash transactions
exceeding $25,000 and money-transfer agencies to
come under the purview of the surveillance
network. They have also suggested that lawyers,
foreign-exchange dealers and real-estate agents be
asked to report transactions exceeding
$25,000.
The September
11, 2001, attacks on the US are estimated to have
cost about $500,000 to plan, but since then the
cost of staging terrorist attacks has dropped. The
Madrid bombings are estimated to have cost
$15,000, the serial train blasts in Mumbai $4,000,
and the London subway bombings $2,000.
Intelligence officials are right in
casting their eyes on legal business to track
terror funding. But their focus on movement of
large sums doesn't seem to be quite in step with
the changing nature of terrorist attacks.
Sudha Ramachandran is an
independent journalist/researcher based in
Bangalore.
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