TERROR-FUNDING

1. Context 

2. Key points

• It was hosted by the Ministry of Home Affairs.
• The NMFT started in 2018 as an initiative of the French government which had, in 1989, laid the foundation of the Financial Action Task Force (FATF),  the international body at the forefront of combating money laundering and terrorist financing.
• The issue of terror funding also came to the limelight due to increasing cases of it across the Indian States.

3. Terror Funding

• According to unodc.org:
  It is sponsored money for initiating terrorist activities which are required for the following purpose:

1. To recruit and support members
2. To maintain logistics hubs
3. To conduct operations

• Terrorist financing involves the solicitation, collection or provision of funds with the intention that they may be used to support terrorist acts or organisations.
• Funds may stem from both legal and illicit sources.

• The primary goal of individuals or entities involved in the financing of terrorism is therefore not necessarily to conceal the sources of the money but to conceal both, the financing and the nature of the financed activity.

4. Sources of terror funding

• Sources of terrorist funding include, but are not limited to, low-level fraud, kidnapping for ransom, the misuse of non-profit organisations, the illicit trade in commodities (such as oil, charcoal, diamonds, gold and the narcotic "captagon") and digital currencies.
• Use of virtual assets and crowdfunding platforms by terrorist entities, their use of the dark web, the links between terror financing and legitimate economic activities and payment intermediaries.

5. The 2018 conference was hosted by France

• The conference agreed on "fully criminalising terrorism financing even in the absence of a link to a specific terrorist act" and "enhancing the traceability and transparency of financial flows" by developing frameworks to tackle the risks associated with the use of cash, informal remittance systems (including hawalas), prepaid cards, anonymous means of payments and by promoting digital transactions.
• It also raised a red flag on new financial instruments being misused and committed to "implement the FATF standards as they apply to crypto-assets", urging the FATF " to advance global implementation".
• Importantly, the conference discussed the "traceability and transparency of non-profit organisations (NPOs) and charitable funds", calling for urgent and effective "implementation of FATF standards relating to non-profit organisations" without disrupting civil society activities.
• It also reiterated the importance of effectively implementing UN sanctions, cooperation on intelligence sharing and capacity building of countries that did not fully adhere to FATF.

6. The 2019 conference was hosted by Australia

• The conference identified "kidnapping for ransom" and "emerging technologies" such as digital and cryptocurrencies, stored value cards, online payment systems and crowdfunding platforms as new channels through which terrorism may be financed.
• It recognised "the critical role played by the private sector to detect and prevent misuse of financial systems by terrorists" and flagged the need for monitoring of NPOs.

7. India's takeaways from previous conferences

• India has articulated its "zero tolerance approach" towards terrorism in these conferences and tried to attract attention to the cross-border terrorism from Pakistan.
• In the 2019 conference, India called for a "united global effort against all those who support terror or help generate finances for terror".
• India pointed out how terror groups are active on social media and that undermines any ban the United Nations (UN) might place.
• It called on nations to expedite the finalisation of a Comprehensive Convention on International Terrorism under the UN and asked for FATF Standards to be effectively enforced.
• Given its experience of China blocking its push for sanctions against Pakistan-based terror groups and terrorists, it called for UN listings and FATF to not be politicised.
• It also asked the international community to initiate a discussion on "Countering Financing of Radicalisation (CFR), which would prevent radicalisation, an essential prerequisite of terrorism.

7.1 Priority issues     

1. Preventing diversion from legal financial instruments by fighting anonymity in financial networks,
2. Restricting the use of proceeds of other crimes for terrorist activities,
3. Preventing the use of new financial technologies, virtual assets like cryptocurrencies, wallets etc, for terror activities,
4. Eliminate the use of illegal Channels, Cash Couriers and Hawala by Terror Networks
5. Prevent the use of Non-Profit Organisation, NPOs Sector to Spread Terror Ideology
6. Continuous capacity building of counter-terror and financial intelligence agencies of all countries.

7.2 India's 5 pillared strategies against the financing of terrorism

1. To establish a comprehensive monitoring framework involving cooperation, coordination and collaboration among all intelligence and investigative agencies.
2. The strategy of "Trace, Target and Terminate", is to be adopted from low-level economic offences to more organized economic crimes.
3. Strengthening and harmonizing the legal structures related to terror finance
4. Developing a robust mechanism against the misuse of Next Generation Technology
5. Strengthening the legal and regulatory framework for asset recovery.

8. International efforts

• To trace the history briefly, the international efforts to tackle the menace of terror financing began way back in 1989 when the Financial Action Task Force (FATF) was formed as a means of bringing order and implementing standards to the monetary system in the world about terror finance and money laundering.
• However, it was the 2001 terrorist attacks that changed the way security agencies looked at terror financing.
• The UNSCR resolution 1267 in 1999 and UNSCR resolution 1373 in 2001 formed the bedrock of the financial sanctions regime for terrorist organisations and individuals.
• The Terrorism Prevention Branch (TPB) of the United Nations Office on Drugs and Crime (UNODC) works on the legal aspects of countering the financing of terrorism, including promoting the ratification of the relevant universal legal instruments, in particular, the International Convention for the Suppression of the Financing of Terrorism (1999) and the implementation of these international standards.

•  It is the UN Security Council unanimously adopted on countering the use of new and emerging technologies for terrorist purposes.
• Among the listed items in the Declaration include the decision to continue to work on recommendations on the three themes of the Special Meeting and the intention to develop a set of non-binding guiding principles to assist Member States to counter the threat posed by the use of new and emerging technologies for terrorist purposes.
• The declaration aims to cover the main concerns surrounding the abuse of drones, social media platforms, crowd-funding and creating guidelines that will help to tackle the growing issue.

8.2 The United Nations Office of Counter-Terrorism (UNOCT)

• It leads and coordinates an all-of-UN approach to prevent counter-terrorism and violent extremism.
• UN Counter-Terrorism Centre (UNCCT) under UNOCT, promotes international cooperation in the fight against terrorism and supports the Member States in implementing the Global Counter-Terrorism Strategy.

8.3 Financial Action Task Force

• The Financial Action Task Force (FATF) is the global money laundering and terrorist financing watchdog.
• The inter-governmental body sets international standards that aim to prevent these illegal activities and the harm they cause to society.
• As a policy-making body, the FATF works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas.
• It was established in 1989 during the G7 Summit in Paris.

8.3.1 Various lists under FATF

• Countries known as Non-Cooperative Countries or Territories (NCCTs) are put on the blacklist.
• These countries support terror funding and money laundering activities. The FATF revises the backlist regularly.
• Iran and the Democratic People's Republic of Korea (DPRK) are under High-risk Jurisdiction or blacklist.

9. National Efforts 

• National Investigation Agency (NIA): Federal agency established by the Indian Government to combat terror in India.
• Unlawful Activities Prevention Act: Anti-terror legislation that seeks to designate an individual as a "terrorist".
• National Intelligence Grid or NATGRID: It has been conceived to develop cutting-edge technology to enhance India's counter-terror capabilities.
• NATGRID is a seamless and secure database which provides information on terrorists, economic crimes etc.
• Multi-Agency Centre (MAC) and Subsidiary Multi-Agency Centres (SMAC): The mandate is to share terrorism-related intelligence inputs daily.
• NSG Hubs to ensure a rapid response to terrorist attacks and Coastal Security Scheme for maritime security.
• India has proposed a permanent secretariat to coordinate a bid to fight terror funding: The overall approach of "Beyond-Border Cooperation" is the basis for countering terror funding at the global level.
• India has sensed the need for permanency of this unique initiative of NMFT, to sustain the continued global focus on countering the financing of terrorism a proposal for a permanent Secretariat was made for focussing more on this contagious issue.

9.1 Further efforts in curbing terror financing 

• India has borne the brunt of terrorism and has witnessed the serious loss of life and property in senseless explosions in large cities in the past few decades.
• The dastardly efforts to radicalise and mislead the youth create a schism in society.
• In this situation, India needs to take the lead in bolstering such efforts.
• The 90th Interpol General Assembly in New Delhi, followed by a special session of the UN Security Council's Counter in late October.
• In the third week of November, India hosted another global conference focused only on Countering the Financing of Terrorism (CFT).

10. The global flow of funds for nefarious purposes has three traditional channels:

1. Direct smuggling of cash through international borders.
2. The use of hawala networks
3. Banking networks including SWIFT and other international channels.

• Swift technological developments in the areas of blockchain or cryptocurrencies which transcend national boundaries and international currency systems have emerged as a new channel for financing terrorist and other illegal activities.
• We are aware that terrorist organisations raise money through several sources like travel agencies, money changers, real estate, retail outlets, NGOs, charitable trusts and even from state sponsors.
• Terrorists also derive funding from a variety of criminal activities ranging in scale and sophistication from low-level crime to organised fraud or narcotics smuggling or illegal activities in failed states and other safe havens.
• Declassified files seized during the raid on Osama Bin Laden's Abbottabad hideout also revealed terror financing-related documents.
• The first step in identifying and forestalling the flow of funds to terrorists is to understand the funding requirements of modern terrorist groups.
• The costs associated not only with conducting terrorist attacks but also with developing and maintaining a terrorist organisation and its ideology are significant.
• Funds are required to promote a militant ideology, pay operatives and their families, arrange for their travel, train new members, forge documents, pay bribes, acquire weapons and stage attacks.
• Terrorists use a wide variety of methods to move money within and between organisations, including the financial sector, physical movement of cash by couriers and movement of goods through the trading system.
• Charities and alternative remittance systems have also been used to disguise the terrorist movement of funds.
• The adaptability and opportunism shown by terrorist organisations suggest that all methods that exist to move money around the globe are to some extent at risk.
• Only accurate and well-linked financial intelligence can reveal the structure of terrorist groups and also the activities of individual terrorists.
• Of late, such financial intelligence from the private sector has also given significant clues to foil terrorist acts.
• As the world shrinks with technological and communication changes, terrorists, criminals, weapons and funds are also able to move across national boundaries easily.
• International cooperation between law enforcement authorities in this area is a sine qua non for combating such cross-border challenges.