Terrorism in India is sustained by complex financing networks that exploit both traditional and modern channels. Funds flow through hawala, narcotics, counterfeit currency, and cyber platforms, often with cross-border links. As per FATF, curbing these sources is essential to dismantle terror operations. India has adopted legal, technological, and diplomatic measures to choke such financial lifelines.

Major Sources of Terror Funding in India

• 1. Hawala & Informal Value Transfer Systems (IVTS)

  • Underground money transfer channels bypassing banking routes.
  • Example: Use of hawala networks to fund separatist groups in Jammu & Kashmir.

• 2. Counterfeit Currency

  • Cross-border smuggling of Fake Indian Currency Notes (FICN), often from Pakistan.
  • RBI data shows FICN detection rose sharply during peak militancy years.

• 3. Narcotics & Drug Trafficking

  • Golden Crescent (Afghanistan–Pakistan–Iran) and Golden Triangle routes finance terror groups.
  • Example: Lashkar-e-Taiba’s involvement in heroin smuggling.

• 4. Charitable Front Organizations & NGOs

  • Misuse of religious trusts and social organisations for diversion of funds.
  • Example: Banned outfit Jamaat-ud-Dawa posing as a charity.

• 5. Extortion & Kidnapping for Ransom: Common in insurgency-hit regions (North-East, LWE areas).

• 6. State Sponsorship: Direct funding, arms, and training support from hostile foreign states.

Efforts to Curtail Terror Financing

• 1. Legislative Measures

  • Unlawful Activities (Prevention) Act, 1967 – criminalises terror funding.
  • Prevention of Money Laundering Act, 2002 – targets laundering channels.

• 2. Institutional Strengthening

  • Financial Intelligence Unit-India (FIU-IND) monitors suspicious transactions.
  • Multi-Agency Centre (MAC) coordinates intelligence sharing.

• 3. International Cooperation

  • Participation in Financial Action Task Force (FATF) — Pakistan placed on Grey List (2018–2022) partly due to Indian diplomatic efforts.
  • Bilateral MoUs for intelligence sharing with neighbouring countries.

• 4. Technological Interventions

  • Use of AI-driven suspicious transaction monitoring in banks.
  • Linking PAN–Aadhaar to curb shell accounts.

• 5. Operational Actions

  • NIA raids on NGOs suspected of terror funding in J&K (2021).
  • Crackdown on hawala operators by Enforcement Directorate.

‘No Money for Terror’ (NMFT) Conference, 2022 – New Delhi

• Aim: Build consensus on denying terror groups access to financial resources globally.

• Objectives:

  1. Promote global cooperation in investigation and prosecution of terror funding.
  2. Enhance information sharing between Financial Intelligence Units.
  3. Address emerging technologies being misused — cryptocurrencies, darknet transactions.
  4. Develop uniform standards for asset freezing and recovery across jurisdictions.
  5. Strengthen the role of FATF Recommendations as a global benchmark.

• Outcome: India stressed on “no distinction between good and bad terrorism”, urged action against states sheltering and funding terror.

Curbing terror financing is as critical as neutralising militants on the ground. By choking financial lifelines through strong laws, financial intelligence, and international collaboration, India aims to weaken the operational capability of terror outfits, in line with the NMFT agenda of a terror-free global society.