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In India, “terror fund flow may have increased”

February 25, 2010

An increase in suspicious financial transaction reports (STRs) filed by Indian banks to financial authorities in that country suggests that terrorist financial activities may also be on the rise, according to an article from Daily News & Analysis on Feb. 16.  However, as the story notes, the uptick in numbers may simply be the result of improved detection software at the banks.  From DNA:

After the terror attack in Mumbai on November 26, 2008, the government had indicated its intent to crack down on all activities linked to terror. It was, therefore, expected that the sources and channels of terror funding would be squeezed soon.

However, in 2009, the year following the carnage, there was a two-fold jump in suspicious transactions across the country. Most of these transactions are believed to be aimed at bankrolling terror activities.

The financial intelligence unit (FIU) of the department of revenue of the Union finance ministry has revealed that as many as 4,409 suspicious transaction reports (STRs) were received by the unit in 2009.

According to the report prepared by the unit, a copy of which is with DNA, the numbers were a staggering six times more than those in 2007 and more than double compared to 2008. The number of STRs for these years was 817 and 1,916 respectively.

An STR is defined as any transaction, whether or not made in cash, which gives rise to a reasonable ground of suspicion that it may involve financing of activities relating to terrorism, among other things. And, under the Prevention of Money Laundering Act (PMLA), every reporting entity (financial institution) is required to report suspicious transactions to the FIU.

The STRs recorded were across the entire financial sector, including banks, financial institutions and intermediaries. While banks reported 2,826 STRs, financial institutions across the country reported 841. Intermediaries recorded 742, taking the total to 4,409 across all sectors in one year.

What has left the authorities worried is that a majority of these transactions are in cash, making it difficult to keep track of the money trail.

One of the reasons, according to the report, behind the enormous increase in such transactions could be the installation of anti-money laundering software across the financial industry, which facilitates the identification of suspicious transactions and increases the number of STRs reported.

“Another aspect which has helped in identifying STRs are the amendments to the PMLA which were made effective from June 1, 2009,” states the report.

The report further shows that out of the 4,409 STRs received, the FIU processed 4,019 SRTs and out of that 2,270 STRs [sic] were passed on to the agencies concerned for further action. As many as 35, 730 counterfeit currency reports (CCRs) were also recorded in 2009.

So is it an increase in financing or an increase in detection?  We can judge these activities by their fruits.  In December, counter terror expert David Benjamin noted that, “Very few things worry me as much as the strength and ambition of the Lashkar-e-Taiba.”  I will take little comfort in improved software detection if an increasingly brazen & zakat-greedy Lashkar-e-Taiba manages to carry out another 26/11.

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