I will now take a few minutes to highlight some of the areas where I think counter financing of terrorism efforts will be focused, both in India and other nations. The challenges in this area go beyond the formal sector, to include a wide range of other activities that make use of the international financial system.
The first area to examine is charities. It is important to note at the outset that the vast majority of charities are admirable organisations providing important services to communities that might otherwise go without. We must make sure that the actions we take to combat terrorist financing do not dampen the charitable impulse. Charities represent a uniquely ideal vehicle not just to raise and move funds, but to provide material support to violent extremist movements in the form of radicalisation, indoctrination and logistical cover and support.
Our primary challenge is to strike the right balance among three imperatives. First, we need to shut down charities that are complicit with terrorist groups. Second, we also need to provide adequate oversight of charities to promote appropriate transparency. Third, we need to ensure that there are safe alternative channels to provide charities to areas that have a critical need for humanitarian services, but that are particularly vulnerable to terrorist exploitation. It is worth noting here that India is playing an active role in the issue, to include hosting an upcoming regional conference next month on the abuse of charities that will be attended by officials from neighbouring countries in South Asia.
Hawala, or informal remittance systems, are popular in many parts of the world, including here in India. They are used by a wide segment of society and are a key mechanism for those who live in communities without easy or affordable access to formal financial institutions. However, a lack of appropriate oversight and regulation of hawala leads to a lack of transparency, which in turn makes it an ideal tool for terrorist financiers. This is a big issue for India, as hawala is estimated to account for 30-40 per cent of the formal financial sector here, and it will be an important challenge moving forward.
The last vulnerability I want to touch upon is more modern, new, or emerging technologies such as internet-based payment services, credit cards, or prepaid cards. Some of these were reportedly involved in the Mumbai attacks of 26/11. Here, we need to make sure that our financial regulatory framework keeps pace with innovations in the financial sector so that new vulnerabilities are not created. India clearly understands this. The Indian Parliament just last week enacted a major amendment to the existing law on money laundering, which, among other things, requires credit card operators to report transaction information to India’s financial intelligence unit in the same manner as banks and other financial institutions.
Now I’ll turn to the second half of that strategy, which is offence — identifying, disrupting and dismantling terrorist networks. Just as transparency is the key to the “defence” prong, the key to this prong is international cooperation.
The United Nations Security Council Resolution (UNSCR) 1267 provides the framework for global action against Al-Qaeda and its affiliates. Under UNSCR 1267, more than 170 countries have implemented blocking orders to freeze the assets of more than 500 individuals and organisations, currently listed under the resolution. Importantly, following the recent terrorist attacks in Mumbai, the United Nations Security Council designated the charity Jamaat-ud-Dawa (JUD) as a front organisation for Lashkar-e-Taiba. Along with JUD, the Security Council designated four key senior figures within Lashkar-e-Taiba, including its chief of finance and chief of operations.
Exceprts from remarks made by Daniel Glaser, Acting Assistant Secretary (Terrorist Financing), United States Department of Treasury, at the India Today Conclave 2009 in New Delhi, March 6, 2009
