Over 1,400 instances of terror financing were red-flagged by intelligence and security agencies last year, a finance ministry report says, marking a 300 per cent jump in such suspicious transactions. Based on a threat assessment, India has identified funds/resources from organisations outside India, counterfeiting of currency, and criminal activities including drug trafficking and extortion as the major sources for terrorist financing. The Financial Intelligence Unit (FIU) of the finance ministry — the agency responsible for receiving, analysing and dissemination of suspicious transaction reports (STRs) to security and anti-money laundering and tax-evasion departments — reported a more than 100 per cent rise in the number of STRs received during 2011-’12. The instances of reportage of fake currency are also on the rise, the FIU says. The IMF had also warned that India faces significant money laundering and terrorist financing risk.
Given the seriousness of the challenge, the government must not delay passage of a Bill amending the Unlawful Activities (Prevention) Act. The Bill provides for more stringent punishment for terror financing and declares such financing and money laundering as terrorist acts. It widens the definition of ‘terrorist act’ by including activities that threaten India’s economic security and damage its monetary stability by production, smuggling or circulation of ‘high quality’ counterfeit currency. Unfortunately, despite having been cleared by the Cabinet long back, the Bill has not be presented in Parliament.
The FIU should be strengthened to tackle the twin challenge of terror financing and money laundering. There is a strong apprehension that since many politicians themselves use the hawala route to launder black money, any legislation to block this activity will have some vested interests working on leaving loopholes in it. It is vital that the designs of such vested interests be frustrated and a foolproof amended Bill be prepared and passed speedily.