Need to plug funding of terrorist outfits

OPINION/ MK Narayanan

Reducing the flow of funds and money supply to terrorist outfits and organisations is perhaps the most vital aspect after penetration of these outfits. Reducing the flow of funds would limit terrorist capability to acquire weapons, recruit cadres, establish training facilities and state-of-the-art secure communications.

However, the difficulty is that terrorism is generally a 'low budget' enterprise. Not all terrorist acts require large funds. The need for and quantum of funds is determined by the size and area of the operation. The more common methods employed by terrorist outfits to generate funds, as experienced in the context of South Asia, are:

Voluntary contributions: From individuals, members of expatriate communities, and organisations that sympathise with the broad objectives of the terrorist organisation. The LTTE in Sri Lanka and the Al Qaeda, regularly receive sizeable contributions through such means.

Forced/Compulsory donations: Ethnic, ideological and religious terrorists are known to use the technique of forced or compulsory donations. On special occasions, such as religious festivals, sending 'collection boxes' is fairly common, and provides anonymity as well.

State support/ sponsorship: The Lashkar-e-Toiba, the Hizbul Mujahideen and the Al Badr (which operate in India), are well patronised, including through provision of funds, by certain official agencies across the border.

Extortion and use of coercive methods: Many terrorist outfits today imitate criminal enterprises. Intimidation of small businesses, individuals and even some state enterprises to extort funds has become common.

Association with criminal syndicates: Jehadi and non-jehadi terrorist outfits seek and enter into partnerships with organised criminal syndicates, and outsource fund-raising to the latter. This is largely true in metropolitan cities. It takes many forms, but mainly bank robberies and kidnapping for ransom.

Utilisation of legitimate business enterprises: Terrorist outfits set up legitimate business enterprises like restaurants, real estate and shipping and utilise part of the proceeds to siphon off funds for terrorist activities. Among terrorist outfits, the LTTE has a very well-established network of legitimate businesses, which provide both funds as well as logistics for their activities. Jehadi terrorist organisations have begun to follow suit.

Stock market operations: Isolated instances of terrorist outfits manipulating the stock markets to raise funds for their operations have been reported. 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.

Narcotics: Funds from drug cultivation and trafficking in narcotics are extensively used to fund terrorist outfits. Both jehadi outfits and the LTTE rely heavily on such funds for their activities.

Moving funds for terrorist purposes to the actual locale where a terrorist act is perpetrated is a carefully executed exercise. Terrorist outfits, as a rule, employ money laundering techniques so as to evade detection by enforcement agencies. The most popular means employed in South Asia for laundering funds, is the 'underground and parallel banking system' which ensures placing of funds without actual or visible movement of money. (Excerpts from a lecture delivered by National Security Advisor MK Narayanan at the 43rd Munich Conference on Security Policy on February 11)