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Habib Bank manipulating Stock Market to raise funds for Terrorism February 15, 2007

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Speech at the 43rd Munich Conference on Security Policy
02/11/2007

Source : http://www.securityconference.de

Speaker: Narayanan, M.K.
Funktion: National Security Advisor, Republic of India
Nation/Organisation

Listen : Click

I am delighted to have the opportunity to speak before this distinguished audience on an issue that is of direct relevance to India’s security. I propose to address the issue of financing of terrorism in the context of a sustained and multi-pronged combat against international terrorism.

International terrorism is recognized today as one of the gravest scourges facing mankind. Terrorism is not a new technique, and the view of many experts is that it may never be fully eradicated. What has made terrorism more lethal and widespread is the adoption of ‘suicide’ tactics, the availability of modern instruments, and global communications. The effectiveness of terrorism is often enlarged by the elements of theatre in it, magnified further by the reactions of targeted societies. The temptation to employ terrorist tactics is often derived from the comparative advantages that terrorism as a technique provides viz. the rapid spread of images, its immediate impact, and enabling communities that lie at the extreme edge of frustration to make their presence felt.

Admittedly, there is no one monolithic source of terrorism. The diversity of motivations becomes clear from an analysis of different geographical areas.

Undeniably, faith-based terrorism, which is sustained by strong external linkages and connectivity, is the defining global threat today. Intricate networking, connects vast numbers of radical Islamist terrorist groups, though any notion that Islam, the religion, is responsible needs to be categorically rejected.

World-wide, operations of terrorist groups reveal dangerous patterns. An entirely new breed of terrorists has emerged. Terrorist outfits today have a trans-national reach. New cells and new franchises are evolving. New support structures and financing mechanisms are being created. Passing of messages is becoming more sophisticated. Terrorist outfits are no longer tethered to geographical locations, or for that matter, even to political ideologies. Captured militants reveal that it has been possible to acculturate recruits coming from different climes, backgrounds, skills and countries. Such cross-cultural compatibility is paving the way for deadly attacks in unexpected locales in the future.

The fight against international terrorism is thus likely to be a long drawn out, and sustained, one. There are two major areas on which to concentrate: First, the hard-core of terrorist planning where actual operations are conceived and implemented; and Second, the manner in which sympathy is generated for the objectives of particular cells, where recruits are inspired to sign-up and where hiding places are created away from the rule of law.

For the panel discussion, I shall restrict myself to the First aspect. Reducing the flow of funds and money supply to terrorist outfits and organizations 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-or-the-art secure communications. The difficulty, however, 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 organizations that sympathize with the broad objectives of the terrorist organization. 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 round of ‘collection boxes’ is fairly common, and provides anonymity as well. Compulsory subscriptions to pro-terrorist publications have laterally become an important avenue for generation of funds. The Pakistan-based Lashkar-e-Toeba’s monthly, Majalah-al-Dawana, and its weekly magazine, Al Ghazwa, are two prime examples.

State support/sponsorship: The Lashkar-e-Toeba, the Hizbul Mujahideen and the Al Badr (which operate in India), are well patronized, including through provision of funds, by certain official agencies across the border. Shared objectives such as involvement in ‘Low Intensity Conflict’ provide the excuse for such official support. A tentative estimate of funds made available to such terrorist outfits annually is in the region of a few million dollars.
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 Organized Criminal Syndicates, and outsource fund-raising to the latter. This is largely true of 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 viz. restaurants, real estate, shipping, etc. and utilize 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 organizations 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 (India) 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.

Misuse of banking channels: Legitimate banking channels are regularly being used to fund terrorist operations. Many instances of funds received via banking channels from so-called safe locations such as Dubai and UAE intended for terrorist organizations have been detected by Indian Counter-Terrorist Agencies. Each individual transaction tends to be small so as not to attract attention and to avoid detection. Use of both real, and fraudulent, ATM cards has also been resorted to at times.

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. The sharp rise in opium cultivation in Afghanistan – which has more than doubled during the past few years – raises concerns of more funds becoming available to terrorists. According to Indian Agencies at least 1/8th of their major interdictions reveal a drugs- terrorist nexus.

Counterfeit currency: Counterfeiting of currency is currently a favourite method being adopted (by Agencies across the border) to fund terrorist activities directed at India. Large amounts of high quality counterfeit Indian currency are detected each year – the normal route being via Nepal, and Bangladesh.

Charities: An important source of funds to jehadi terrorist outfits are religious charities. Sincere believers contributing to charities are perhaps unaware that a sizeable portion of the funds go to fund terrorist activities and terrorist outfits. Many of the charities are already designated as ‘Terrorist Front Organisations’; yet most continue to operate under new labels. The Al Rashid Trust went through several changes in nomenclature, while the banned International Islamic Relief morphed into the Sanabil Al Khir Foundation. Conduits through which such funds find their way to terrorist organizations include established banking channels such as the Habib Bank in Pakistan.

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.

A combination of conventional money laundering techniques, with placement of funds utilizing the ‘underground and parallel banking system’ has made it extremely difficult to track funds utilized for terrorist purposes, since no audit or paper trail is available. The globalisation of terror, and the ability of terrorists to exploit state-of-the-art technology, thus further enhances their capability to move ‘hot money’ across international borders.

Even the most optimistic forecast is that terrorism as a form of asymmetric warfare will continue for the foreseeable future. International cooperation amongst States is, hence, a sine qua non. States still command larger resources than any terrorist group, and pooling of strengths by all concerned States is critical to defeat terrorism worldwide. Cooperation is needed both in the bilateral and multilateral spheres, including collective approaches through the United Nations. While some improvement has taken place in regard to bilateral cooperation, the role of organizations such as the United Nations becomes critical as terrorism becomes global. The 1267 Committee and the Counter-Terrorism Committee of the Security Council have a key role to play in this respect.

Many countries, including India, have already in place a legal framework for tackling terrorism. Several – India included – have specific legislations to prevent financing of terrorism. India has the: (a) Foreign Exchange Management Act, 1999, (b) Narcotic Drugs and Psychotropic Substances Act, 2003; and (c) Prevention of Money Laundering Act, 2003 (which entered into force in July, 2005), apart from provisions in other Acts such as the Unlawful Activities (Prevention) Act of 1967 as amended in 2004, to deal specifically with the threat of terrorism.

Adoption by the UN General Assembly of the UN Global Counter-Terrorism Strategy in September last year, has enabled a global consensus to emerge on measures that States must undertake to prevent and combat terrorism. India is committed to fully implementing the UN Global Counter-Terrorism Strategy, including measures against the financing of terrorism. India has also joined the International Convention for the Suppression of Financing of Terrorism. We have established the necessary legal, regulatory and administrative framework for combating money laundering and financing of terrorism. A Financial Intelligence Unit-India is already in operation and will be the nodal agency responsible for receiving, processing, analysing and disseminating information relating to suspect financial transactions to intelligence and enforcement agencies.

Conclusion

India has been working with its international partners and regional organizations to prevent and combat international terrorism. We have constituted Joint Working Groups with 25 States, and regional organizations like the EU and BIMSTEC, for coordinating and cooperating in our counter-terrorism efforts. These Groups meet regularly, and have proved useful in providing a forum for the exchange of information and experiences. In addition, India believes that there is need for far greater vigilance and stricter provisions so as to make off-shore jurisdiction more transparent. In addition, lifting banking secrecy and the corporate veil in terrorist-related cases would help. Some new and innovative disruption techniques could also be contemplated.

The importance of international cooperation in combating global terrorism, in all its dimensions, cannot be over- stressed. Only by showing zero tolerance to acts of terrorism committed anywhere in the world, and by working together, including sharing of intelligence on terrorist activities, can we effectively counter the terrorist threat. States must refrain from organising, instigating, facilitating, participating in, financing, encouraging or tolerating terrorist activities. They must take appropriate measures to ensure that their territories are not used for setting up terrorist infrastructures or training camps.

INDIA: PAKISTAN BANK EXAMPLE OF ‘STOCK MARKET TERRORISM’

New Delhi, 15 Feb. (AKI/Asian Age) – Terrorists have manipulated the stock markets in India to generate funds and used legitimate banking channels to fund their operations. Conduits through which such funds find their way to terrorist organisations include established banking channels such as the “Habib Bank in Pakistan”, India’s national security adviser M.K. Narayanan has said. “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,” Narayanan told the 43rd Munich Conference on Security Policy

Narayanan delivered his speech on February 11, which was the last day of the three-day conference. His speech focused on the issue of financing of terrorism, which he said was “an issue that is of direct relevance to India’s security”.

“Legitimate banking channels are regularly being used to fund terrorist operations. Many instances of funds received via banking channels from so-called safe locations such as Dubai and UAE, intended for terrorist organisations, have been detected by Indian counter-terrorist agencies. Each individual transaction tends to be small so as not to attract attention and to avoid detection. Use of both real, and fraudulent, ATM cards has also been resorted to at times,” he observed.

Narayanan said that the Lashkar-e-Tayyaba, the Hizbul Mujahideen and the Al-Badr “are well patronised, including through provision of funds, by certain official agencies across the border. Shared objectives, such as involvement in low-intensity conflict, provide the excuse for such official support.”

He cited certain other means employed by terrorists, like utilisation of legitimate business enterprises. “Terrorist outfits set up legitimate business enterprises [like] restaurants, real estate, shipping, etc, 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.”

Narayanan explained that the most popular means employed in South Asia for laundering funds is hawala. “A combination of conventional money laundering techniques with placement of funds utilising [hawala] has made it extremely difficult to track funds utilised for terrorist purposes. The globalisation of terror, and the ability of terrorists to exploit state-of-the-art technology, thus further enhances their capability to move hot money across international borders,” he said.

Another important source of funds to jehadi terrorist outfits were religious charities. Voluntary and forced donations were also common, as was using charities to channelise funds. He said, “Compulsory subscriptions to pro-terrorist publications have laterally become an important avenue for generation of funds. The Pakistan-based Lashkar-e-Tayyaba’s monthly, Majalah-al-Dawana, and its weekly magazine, Al Ghazwa, are two prime examples.”

“India,” Narayanan added, “is committed to fully implementing the UN global counter-terrorism strategy, including measures against the financing of terrorism. India has also joined the International Convention for the Suppression of Financing of Terrorism. We have established the necessary legal, regulatory and administrative framework for combating money laundering and financing of terrorism. A Financial Intelligence Unit-India is already in operation and will be the nodal agency responsible for receiving, processing, analysing and disseminating information relating to suspect financial transactions to intelligence and enforcement agencies.”

(Aki/Asian Age)

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