The US has asked India to "redouble efforts against hawalas" as part of the proposed measure to combat terrorist financing, Kenneth Dam, deputy secretary, US treasury department, told the media on Monday.
Reserve Bank of India governor Bimal Jalan has told Dam that banks have been asked to be more vigilant and ensure the identity of depositors. Stronger measures would be in place as soon as the Money Laundering Bill is passed, he told Dam.
Dam discussed mutual cooperation with Jalan to tackle money laundering. The RBI governor has reportedly told the treasury department secretary that the hawala channel is not being used for terrorist financing as the volume is very low and the differential between the hawala and official rates has narrowed considerably.
The US deputy treasury secretary said that since the September 11 terror attacks, the financial action task force has extended its work in this area aside from just looking into the money laundering aspect. With the US having stepped up information sharing within its own financial system, it is also looking for greater understanding and information sharing among the G-20 countries (including India), G-7 and G-8, said Dam.
Much has to be done with regards to the transfer method and transmission of funds, and the banking regulations to find terrorist accounts, he pointed out.
Dam also made it clear that the State Bank of India (SBI), against which the US Fed had issued a cease and desist order and imposed $7.5 million penalty, was not a case of money laundering.
"It was simply a question of books not having been kept properly in compliance with the regulations," he said.
The US would like India to be part of the international coalition to step up the war against terrorism financing. Financial assets worth $80 million have been frozen since the start of America's war on terrorism. "Of this, $35 million is from the US and $ 45million from other countries," said Dam. India is among the 147 nations that have blocked accounts in cooperation with the US, he said adding, "You can't bomb a terrorist's bank account on foreign soil, so co-operation is extremely critical".
"We have disrupted the flow (of terror funds) and we are trying to get more information from more countries. Many governments are taking measures informally," he said.
He said if the country implemented fiscal, financial, trade and investment reforms, it could see growth of 8 to 9 per cent. Dam's dialogue with senior government officials and financial and economic experts had centred around these issues during his trip to New Delhi and Bangalore last week.
The US has made several suggestions for consideration to the Indian government on the aspect of terrorist financing. Dam said that six key challenges have been identified including information sharing, encouraging independent notification of terrorist groups by other nations, redoubling efforts by the US and allied nations against charities, exploiting the industrial quantity of documents captured in Afghanistan, and using the financial investigation to track down "the ticking time bombs".
