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How hawala money is used to fund terror

March 06, 2009 15:41 IST

The Financial Intelligence Unit last month marked 200 transactions in India -- running into Rs 2,000 crore -- as terror-financed. Now, it has commenced its probe to trace the origin of the funds.

It is a known fact that terrorist outfits use counterfeit notes to finance terror operations. This is just one of the means adopted by terror outfits and Pakistan's Inter Services Intelligence to raise Rs 1,800 crore a year to finance terror. However, in the case being probed by the FIU, there is a considerable amount of money deposited in the banks, meaning they are not counterfeit.

The money which is pumped into terror operations is generated through various sources: smuggling of opium, real estate, fake notes and extortion bids.

Interestingly, the main source of revenue remains the ISI. A study conducted on terror financing indicates that the Pakistan government allocates money officially to the Secret Service Funds. This amount is given for collection of intelligence, spy services and secret operations. However a large part of these funds are diverted for terror related operations by the ISI.

Fugitive gangster Dawood Ibrahim, too, has a very important role to play in financing terror. Intelligence Bureau officials say that money that is deposited in banks is generated through hawala transactions and Dawood is one of the main sources of such transactions.

Dawood, according to an official, was in charge of routing in funds for terrorist activities carried out by Students Islamic Movement of India.

Dawood's main source to pump in these funds was an aeronautical engineer who currently is holed up in Saudi Arabia. Dawood with the help of this man, called as Basheer, had set up a 'Muslim Defence Fund' for such transactions.

The big question is how these outfits managed to stash these funds in Indian banks. The confession of Ashfaq Ahmed, a Lashkar-e-Tayiba operative, throws more light on the same.

He states that his bosses in Pakistan transact money through people settled in Riyadh. He says that most of the funds are transferred to India and are picked up by a hawala transactor. Investigating agencies say that the main places where funds land up are Chandini Chowk in Delhi and several parts of Mumbai.

The hawala transactor in turn converts the money and then deposits it in the bank. Terror outfits largely rely on fruit vendors, businessmen dealing with electronic goods and those dealing with foreign exchange to conduct hawala transactions.

Once orders to carry out a terror strike is given, the person who has deposited the money is given orders to withdraw it.

Police sources say that records show that hawala transactors have a code name for cirriencies that the use regularly. The US dollar is known as hara, the UK pound as popleen, Dutch Gliders as God, Deutsche Marks as DM and the Franc as FF.

A bank official in Bengaluru says that the RBI has issued guidelines to tackle the menace of fake currency. However, it is very difficult to keep a tab on hawala money.

"We cannot ask the customer the source of the money and neither do we have the infrastructure or expertise to track the source of the money. It is more of a police job and it is they who have to keep a tab on the money that is being transacted through hawala operators," he says. 

Vicky Nanjappa in Bengaluru