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Terror Finance Inc.

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By Sanchita Bhattacharya
Research Associate, Institute for Conflict Management

While winding up the tenure of Pakistan’s Parliament (on March 15, 2013), within a short span of the three preceding weeks, both the Senate (Upper House) and National Assembly (Lower House) passed the Anti-Terrorism (Amendment) Bill 2013, related particularly to offences relating to the financing of terror. The National Assembly passed the Bill unanimously on February 20, while a majority in the Senate passed on March 5, 2013. The Bill empowers Government authorities to take action against elements involved in financing terrorism in the country, and provides, among other things, for the confiscation of properties owned by those involved in such activities.

This latest Bill is a reproduction of the earlier Anti-Terrorism (Amendment) Bill 2010, proposing amendments in the existing Anti-Terrorism Act (ATA) 1997, which had been introduced in the Senate in July 2010. This, however, remained with the Senate Standing Committee on the Interior, and was reportedly withdrawn in 2012, though reasons for this remain unknown.

The possibility of UN sanctions on Pakistan for failing to comply with standards of the Financial Action Task Force (FATF) is likely to have fuelled the development. In October 2011, the FATF pressed upon Islamabad to amend ATA 1997 for freezing assets and other stern action on charges of terrorist financing by February 12, 2012. On missing the deadline, Pakistan was blacklisted by FATF in February 2012. Later, in June 2012 FATF, reiterated that laws on counter-terrorism financing and anti-money laundering in Pakistan either did not exist or were ineffective in Pakistan. Further, in October 2012, the FATF included Pakistan in its Public Statement, underlining continuing deficiencies in its anti-money laundering/counter-terrorist financing (AML/CTF) regime. Pakistan was first publicly identified by the FATF in February 2008 for deficiencies in its AML/CTF regime.

Media reports of October 2012 suggest that a few token steps were taken by the State Bank of Pakistan (SBP), to check possible financing of terrorist activities, and that 128 bank accounts had been frozen and over PKR 750 millions had been seized. A Financial Monitoring Unit was also established under the Money Laundering Act to monitor suspicious financial transactions.

Earlier, according to the International Narcotics Control Strategy Report, Volume-II 2008 SBP and Customs had set up joint counters at international airports to monitor the transportation of foreign currency. In furtherance of the ‘official commitment’ of 2007, authorities made a number of significant cash seizures at the international airports in Karachi (Provincial Capital of Sindh), Lahore (Provincial Capital of Punjab) and Peshawar (Provincial Capital of Khyber Pakhtunkhwa-KP), as well as at various land border crossings.

Pakistan is internally crippled by terrorism and the vast flows of funds to violent extremist groupings in the country, even as the danger percolates from this domestic infrastructure of terrorism to other parts of the region and world. Terrorist groups use a range of instrumentalities to raise finances, including hawala (illegal money transfer), abuse of the charitable sector, narco-finance, abduction etc. Worse, state institutions are deeply complicit in a wide range of terror finance operations, prominently including the printing and distribution of Fake Indian Currency Notes (FICN) , as well as a protracted involvement in drug running to facilitate the operations of the Taliban in Afghanistan.

As a result of growing concerns following 9/11, a 2002 report on Financial Terrorism noted that Government officials in Pakistan estimated that USD 7 billion entered the country each year through hawala; the actual volume is likely to be significantly higher. Despite the SBP’s initiative, unlicensed hawaladars (hawala agents) still operate illegally in parts of the country (particularly Peshawar and Karachi), and authorities have taken little action to identify and enforce the regulations prohibiting nonregistered hawaladars. In a recent incident, on November 22, 2012, the US Department of Treasury designated a hawala firm, Rahat Ltd., and its owner Mohammed Qasim and the manager of its Quetta (Provincial Capital of Balochistan) branch, Musa Kalim, as financers and money launderers for the Taliban. The firm has branches in Afghanistan, Pakistan and Iran which “have been used by the Taliban to facilitate their illicit financial activities,” the Department disclosed.

Terror financing under the garb of charitable trusts have been a principal source of funding for terror outfits. One notorious trust, Al Akhtar, an offshoot of the terrorist Jaish-e-Mohammed (JeM), for instance, has been designated by the U.S. Treasury Department as a Foreign Terrorist Organization (FTO) since 2003 and by the UN since 2005.  Al Akhtar Trust has, moreover, been operating under a multiplicity of other identities, including Pakistan Relief Foundation, Pakistani Relief Foundation, Azmat-e-Pakistan Trust and Azmat Pakistan Trust. Saud Memon, a financier of Al Akhtar Trust, was found to be involved in the kidnapping and murder of Wall Street Journal's reporter Daniel Pearl. Al Rashid Trust (ART) also deserves mention in this context; it was listed by the U.S. Department of Treasury on September 23, 2001 and by UN on October 6, 2001. ART was known to have been supporting jihadi activities in Chechnya, Kosovo, Afghanistan and Jammu and Kashmir under the leadership of Mufti Mohammad Rashid. It also worked under the identities of Al Amin Welfare Trust, Al Amin Trust, Al Ameen Trust and Al Madina Trust and was linked to Lashkar-e-Toiba (LeT) , JeM, Al Qaeda and Lashkar-e-Jhangvi (LeJ), among others. Later, by the end of 2001, it merged with Al Akhtar Trust.

The Saudi angle to such disruptive activities is manifest in the example of Al-Haramain Foundation (Pakistan), a branch of the Saudi Arabia-based Al-Haramain Islamic Foundation founded by Aqeel Abdulaziz Aqeel al-Aqeel. This ‘charitable organization’, associated with Maktab al-Khidamat (MK), an organization financed by Osama bin Laden, as well as with LeT, was listed on January 26, 2004 by the UN as being associated with al Qaeda and the Taliban, and for participating in financing, planning, facilitating, preparing or perpetrating of acts or activities in conjunction with al Qaeda.

Narco-finance has been another vital element of terrorism. It has been reported that 90 per cent of the world's heroin goes through Pakistan, carried in on trucks from Afghanistan that are owned by the Fauji (Army) Foundation, controlled by the Pakistan Army, so they are never checked by customs. The narcotics trade through Pakistan is principally used for funding terrorism, with the ‘Golden Route’, from Afghanistan through Pakistan and then into Iran established as one of the world’s most lucrative illicit drug thoroughfares.

The deliberations of the “Regional Ministerial Conference on Counter Narcotics” held in Islamabad in November 2012 noted, “There is also an emerging need to explore and address the link between illicit drug production, trafficking and terrorist financing.” Moreover, for enhancing regional cooperation for combating narco-terrorism, one of the aims stated was, “Underline the need to strengthen international cooperation in addressing the links that in some cases may exist between illicit drug trafficking, illicit production of narcotic drugs and drug related financing of terrorism”. Further according to the official record of the Ministry of Narcotics Control, an estimated 551,257 kilograms of heroin was seized in Pakistan over a period of nine years (2003-2011), with the obvious apprehensions that the actual quantities traded through the country are many multiples of the volume seized.

Abduction for ransom is another important tactic used by various terrorist groupings for the dual purpose of generating money and spreading terror. This is often outsourced to gangs that supply arms and money to terrorist groups both in Pakistan and Afghanistan. Reports indicate that all of Pakistan’s provinces are now under attack from armed abductors , with women and children, becoming the easiest targets, along with foreigners and the Shia minority. Data collated from Criminal Statistics of Sindh Province suggest that, between 2003 and 2012 , a total of 12,311 cases of ‘Kidnapping for Abduction’, and 933 cases of ‘Kidnapping for Ransom’ were recorded in the Province. However, the lack of sincerity of the state is evident in the fact that, apart from Sindh, no chronological data is available regarding abduction in other Provinces on the official sites of the respective Provincial Police.

Clearly, there is an urgent need for a strong law to check terror-finance in Pakistan. ATA 1997 had been engineered against the backdrop of the political situation of the 90s. However, after 9/11, the situation changed dramatically for the worse. Accordingly the need to provide augmented powers to Police and other investigating agencies for monitoring and surveillance of persons, financial transactions, and money flows in connection with terrorism has been felt. The new Bill, thus, paves the way for enforcement agencies to take action against those who finance acts of terrorism and those who benefit from the proceeds of such acts.

The objective of the Bill is to “strengthen the provision concerning the offences of terrorism financing and to provide more effective enforcement measures against such offences.” It also expands the scope of the definition of ‘money’ in the context of terrorist finance, as including “coins or notes in any currency, postal orders, money orders, bank credits, bank accounts, letter of credit, travelers cheques, bank cheques, bankers draft in any form, electronic, digital or otherwise and such other kinds of monetary instruments or documents as the Federal Government may by order specify.” The definition of property includes “corporal or incorporeal, moveable or immoveable, tangible or intangible and includes shares, securities, bonds and deeds or interest in property of any kind or money.”

However, the Pakistani state’s enduring legacy of harbouring and supporting terrorism casts doubt on the efficacy of the Act, once it receives Presidential approval. Pakistan’s covert policy of sponsoring terrorist formations as instruments of state policy can never be reconciled with any legislation that seeks to curb terrorism. The present Bill is, at best, a ‘face-saving’ device to counter mounting pressure from the international community. Pakistan’s geo-strategic ambitions will play a decisive role in undermining the efficacy of the provisions of the new Anti Terrorism (Amendment) Bill with respect to control of the financing of terrorism.

[Source: SATP]

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