Challenge of terror financing

Manoj Joshi

Distinguished Fellow, Observer Research Foundation

Last weekend, New Delhi hosted the third ‘No Money for Terror’ (NMFT) ministerial conference on counter-terrorism financing. The first conference was held in Paris in 2018 and the second in Melbourne in 2019. India was scheduled to hold the conference in 2020, but Covid delayed the meeting. The conference is organised by the financial intelligence units of over 100 countries, also called the Egmont group.

The situation for India is far from comfortable. Pakistanis are doing what they have been doing for a long time.

India has suffered major terrorist attacks — the blowing up of the Air India aircraft over the Irish Sea in 1985, the numerous attacks and massacres in Punjab and Kashmir in the 1990s, bombings in various cities, especially Mumbai. The culminating Mumbai attack of 2008, and so on.

Though the threat has diminished, the Modi government continues to pursue a hardline counter-terrorism policy at home and in diplomacy, calling for a UN-backed Comprehensive Convention on International Terrorism (CCIT). It was not surprising that at the NMFT conference, PM Modi and Union Home Minister Amit Shah had strong words for countries that backed terrorism (read Pakistan) or those that blocked action against terrorists (read China).

As a country that has been hit hard by terrorism in the past, India has played an important role in mobilising the global community to tackle the challenge. It has called for a united effort against all those who support terror and generate finances for terrorism. Earlier, speaking at a UN Security Council Committee’s special meeting held in October in New Delhi, External Affairs Minister Jaishankar said that the terrorist threat had morphed into using social media for recruitment and incitement, along with drones, VPNs, message encryption apps, blockchain and digital currencies.

The first NMFT conference was held in 2018 when the Pakistani estrangement with the US led to it being placed on the watchlist of the Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog that also deals with financing in relation to weapons of mass destruction. Pakistan had been on the list before in 2008-09 and had been under increased monitoring in 2012-2015.

Being on the ‘Grey List’ made it difficult for Pakistan to obtain loans from financial institutions like the IMF, World Bank and ADB. Islamabad was forced to act against a number of terrorists and terrorist organisations.

So, Pakistan began to act against Lashkar-e-Taiba chief Hafiz Saeed, and the key operative of the Mumbai attack, Sajid Mir. Hafiz Saeed was sentenced to 68 years in jail for terror and terror financing in April and Lakhvi to 20 years. The action against Mir was a big surprise. Till this year, Pakistan had claimed that Mir, a key operative in the Mumbai attack, and most likely an ISI officer, was dead. Suddenly, he was shown to be arrested in June and sentenced to 15 years’ imprisonment.

However, Pakistan still claims that it is unable to trace Jaish-e-Mohammed chief Masood Azhar. In June 2022, the FATF conducted a three-day onsite visit and gave Islamabad the clean chit. The proceedings and documentation put before the FATF are secret. But there is little doubt that Islamabad's improved relations with Washington, and possibly its cooperation in taking out Al-Qaeda chief Ayman al-Zawahiri played a significant role in its redemption.

But the situation for India is far from comfortable. Writing in the South Asia Terrorism Portal (SATP), Ajai Sahni has noted that though fears of a Khalistani terrorist revival are exaggerated, there is ‘increased coordination between criminal gangs and Khalistani terrorists.’ The ISI is also active in the numerous drone-borne consignments of drugs and weapons that are being dropped in Punjab. In the first nine months of the year, security forces have noted 171 drone flights and there could be others that were not tracked.

The Pakistanis are doing what they have been doing for a long time. In Kashmir, they are operating through The Resistance Front (TRF) and conducting highly effective attacks aimed at keeping the situation on the boil.

The problem with the Modi-Shah approach to fighting terrorism is that it is a ‘one-size-fits-all’ strategy that does not differentiate between domestic separatists and insurgents, and proxy warriors and terrorists sent into the country by Pakistan. It is also selective. There are times, usually linked to elections, when the BJP will make a huge issue of Pakistani activity. Otherwise it simply ignores the challenge. Just why the drone incursions have not figured in the FATF proceedings, or for that matter the NMFT, is not clear. India has every right to respond to this blatant violation of Indian sovereignty, militarily or otherwise. But for the present, the government seems to be doing nothing.

One big lesson ignored is that no strategy that relies only on the use of force will work. This is not just the lesson we learn from Israel, but our own experience.

What is needed is a judicious mix of political action, negotiation, compromise, along with military action. But the problem is that the government’s strategy is also mixed up with the BJP’s prejudiced approach towards the Muslims in the country.

Modi has warned against domestic radicalisation. But the government, which has looked away at the wanton attacks on the Muslim community in the past, does not seem to realise that these actions could well lead to another phase of Islamist terrorism. Though it has sharply declined since 2008, there have been some disturbing incidents lately in the South, which could be a warning of the things to come.

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