Market smells blood money on Street

MUMBAI: The African diamond trade rings the cash registers of the dreaded Al Qaeda. Poppy cultivation in Afghanistan feeds the merciless Taliban. The LTTE’s money is said to come from a shipping network run by its sympathisers while the burgeoning real estate in Karachi, Lahore and Islamabad helped the Lashkar-e-Toiba buy guns.

Terror groups prefer to hide among local population and invest in asset classes that are the flavour of the day, counter-terrorism experts say. This is evident from the fact that most terror groups — be it in Africa, Sri Lanka or Pakistan — try to exploit local trade markets to raise funds.

So when the finance minister P Chidambaram informed Rajya Sabha on Tuesday that the ministry is squaring in on a person who is suspected to have used the Indian equity market for terror funding, many experts were not surprised.

“Their (terrorists) modus operandi could be very simple. They would have a clean frontman or sympathiser (a broker, in this case) routing hawala money into the market and trading on it; returns derived therein would be re-routed through the same hawala conduit to the terrorist organisation,”
said noted counter-terrorism expert B Raman, who also heads the Institute of Topical Studies, Chennai. As a matter of fact, this is not the first time that India is getting dragged into the mammoth blood money racket.

According to media reports, some months ago, raw diamonds from the strife-stricken Angola are smuggled into Surat by African mercenaries for money. Over 25% of Surat’s total diamond business, around Rs 14,000 crore, may well be ‘blood’ diamonds, the report said. Earlier, there were also reports of the government (through Financial Intelligence Unit) tracking over 600 financial transactions it believes could be linked to terror funding and other suspicious activities in the country and the region.

In February, National Security Advisor MK Narayanan went on record saying that there is a rising threat of misuse of legitimate financial enterprises and channels to fund terrorist activities. He had admitted that stock exchanges in Mumbai and Chennai have, on occasions, reported fictitious or notional companies engaged in stock-market operations. Some of these companies were later traced to terrorist outfits, Mr Narayanan had then said.

“There is high possibility in terror groups using the Indian stock market to raise funds. If unofficial estimates are taken into account, ‘black economy’ in India accounts for 30%-50% of the real economy. The reason for this is the lack of a strong legal and definitive punitive system in the country,” said Institute for Conflict Management executive director Ajai Sahni. Institute for Conflict Management, a Delhi-based NGO, provides consultancy to governments on terrorism and internal security. Such misuse of the system can only be weeded out by action on the basis of suspicion, experts feel. For instance, to hook the very secretive and deceptive Italian mafia-run in the US, the authorities booked suspiciously-rich Italian Americans for tax evasion and sent them to jail on long sentences.

“It will be very difficult for the government to cull out concrete evidence against facilitators. Authorities could probably do what the US government did after 9/11 terror attack. They froze all banks accounts which were thought to be (or suspicious of) facilitating fund transfer to terrorists. Thus, they could curb terror funding to some extent,” Mr Raman added.