Presented by ADV. MRS. MAYURA SABNE-BOTUNGALE Visiting Faculty of Law At Navalmal Firodia Law College, Pune, Dist- Pune at IJSARD (International Journal of Socio-legal Analysis and Rural Development) International Virtual Conference 2017 On Law and Social Sciences.

1. TERRORISM FINANCING-
INDIA FAILS TO HIT THE
BULL’S EYE
ADV.MRS.MAYURA SABNE-BOTUNGALE
B.S.L.L.L.B.,L.L.M.
VISITING FACULTY OF LAW AT SHRI NAVALMAL FIRODIA LAW COLLEGE, PUNE,
MAHARASHTRA, INDIA.

2. INTRODUCTION
• INDIA IS A VICTIM OF SEVERAL FORMS OF TERRORISM SINCE DECADES;
• INDIA HAS ALWAYS STRESSED ON THE FACT THAT TERRORISM FINANCING IS THE
CRUX OF SURVIVAL & SPREAD OF TERRORISM;
• INITIALLY THE PRESENT RESEARCH PAPER TRACES THE CONCEPTUAL
DEVELOPMENT OF THE TERM “TERRORISM FINANCING”;
• THEREAFTER, A BRIEF OVERVIEW OF VARIOUS SOURCES & CHANNELS OF
TERRORISM FINANCING IS UNDERTAKEN;
• THEN, THE RESEARCHER HAS DONE A CRITICAL ANALYSIS OF THE COUNTER-
TERRORISM FINANCING REGIME ALONG WITH REGULATORY & ENFORCEMENT
MECHANISM DEVELOPED BY INDIA FROM SOCIO-LEGAL PERSPECTIVE;
• A BRIEF GLANCE AT SOCIAL POLICIES & OUTLOOK FROM THE PERSPECTIVE OF
PRESENT RESEARCH SUBJECT;
• CONCLUSION & RECOMMENDATIONS.

3. OBJECTIVES OF RESEARCH
1] TO UNDERSTAND THE CONCEPT OF TERRORISM FINANCING AND STUDY
ITS SOURCES AND CHANNELS;
2] TO EVALUATE THE INDIAN LEGAL PROVISIONS DEALING WITH
SUPPRESSION OF TERRORISM FINANCING;
3] TO ASSESS THE SUCCESSES AND FAILURES OF THE INDIAN LEGAL
MECHANISM AND SOCIAL POLICIES DEALING WITH SOCIO-LEGAL
CHALLENGES POSED BY TERRORISM FINANCING;
4] TO PROVIDE PRACTICAL RECOMMENDATIONS FOR CONVERTING
FAILURES INTO SUCCESSES.

4. RESEARCH METHODOLOGY
• DOCTRINAL RESEARCH;
• EMPLOYS DESCRIPTIVE, ANALYTICAL, EVALUATIVE AND INTERACTIVE
LEGAL RESEARCH MODELS;
• PRIMARY DATA AVAILABLE FROM VARIOUS STATUTE BOOKS;
• SECONDARY DATA AVAILABLE FROM BOOKS WRITTEN BY ATUTHORS OF
INTERNATIONAL ACCLAIM & VARIOUS ONLINE RESOURCES;
• SILC RULES FOR CITATION METHODOLOGY.

5. CONCEPTUAL DEVELOPMENT OF
TERM “TERRORISM FINANCING”
• “THE FINANCIAL SUPPORT, IN ANY FORM, OF TERRORISM OR OF THOSE
WHO ENCOURAGE, PLAN OR ENGAGE IN IT”- THE WORLD BANK &
INTERNATIONAL MONETARY FUND;
• COVERS WITHIN ITS FOLD ALL THOSE ACTIVITIES WHICH PROVIDE
FUNDING TO TERRORIST ACTIVITIES;
• FINANCIAL AS WELL AS A PUBLIC CRIME.
• STAGES OF TERRORISM FINANCING-
UTILISATION
STORAGE
MOVEMENT GENERATION

6. SOURCES OF TERRORISM
FINANCING
SOURCES
INVISIBLE
PLAYERS
CRIMINAL
ACTIVITIES
CHARITY AND
RELIGION
CONTRIBUTION
AND DONATIONS
CYBERSPACE
FAILED
STATES
STATE
SPONSOR
S
FRAUDS
ILLEGAL
TRADE
ROBERRIE
S
SMUGGLING
KIDNAPPING
&
EXTORTION
DIASPORAS
CROWD
FUNDING

7. CHANNELS OF TERRORISM
FINANCING
Traditional &
only Channles
• FORMAL FINANCIAL SYSTEMS- BANKS & ONLINE MONEY TRANSFER SYSTEMS
• PHYSICAL CHANNELS OF PERSONAL COURIERS
Modern &
Require
Expertise
• INTERNATIONAL TRADE SYSTEM- SMUGGLED GOODS, PRECIOUS METALS
• DIPLOMATIC CHANNELS- CORRUPT BORDER OFFICIALS
Channels &
Sources Most
widely Used
• INFORMAL VALUE TRANSFER SYSTEM(HAWALA) – WIDELY USED IN INDIA
• CHARITY- ZAKAT AND RELIGIOUS CHARITY
• MONEY LAUNDERING

8. INTERNATIONAL & REGIONAL
COMMITMENTS OF INDIA
A] ROLE IN UNITED NATIONS-
• Actively engaged and taken lead role in many international initiatives;
• Signatory to the International Convention for the Suppression of the
Financing of Terrorism, 2001;
• Has actively and progressively implementing the Security Council
Resolutions pertaining to terrorism financing.
• Drafted the Comprehensive Convention on International Terrorism in the year
1996 and submitted to United Nations for consultations and adoption.

9. CONTINUED…
B] ROLE IN REGIONAL ORGANISATIONS-
• Signatory to the SAARC Regional Convention on Suppression of Terrorism
(1987) and its additional Protocol (2004).;
• An architect of recent BRICS- Xiamen Declaration which signifies an
important step in regional commitment of combating terrorism & its financing
• Has undertaken a National Risk Assessment exercise on January 2016 to
comply with the Financial Action Task Force mandate.

10. LEGISLATIVE INITIATIVE
1] THE UNLAWFUL ACTIVITIES PREVENTION ACT ,1967 (AMENDED IN THE
YEARS 2008 & 2013)
• Terror funds are categorized as funds for unlawful association and funds for
terrorism and its allied activities;
• Provides direct punishment for raising funds for terrorist organizations and
acts and for storage of funds;
• The newly added Section 51A empowers Central Government with special
powers to freeze, seize and attach funds, other financial and economic
resources held, owned or possessed by terrorist;
• Amendments have widen the scope of the Act but fail to encompass the
changes in the nature & typologies of terrorism financing;
• Procedural Aspect is appreciable but its utilization is a questionable fact.

11. CONTINUED…
2] THE CONSERVATION OF FOREIGN EXCHANGE AND PREVENTION OF
SMUGGLING ACTIVITIES ACT, 1976
• Relevant in the context of terrorism financing because it tries to conserve
foreign exchange which is facilitator of transborder movement of terror funds
and punishes smuggling which is one of the important sources of terrorism
financing;
• Based on the Policy of Preventive Detention which is constitutionally sound;
• Fails to define main elements in the Act like foreign exchange, etc.;
• Other lacunas are grant of discretionary powers, use of value loaded and
ambiguous words like “satisfaction of the officer”, imprecisely worded
grounds for passing the detention order & execution of the detention order
has been left at the mercy of traditional criminal justice system.

12. CONTINUED…
3] THE FOREIGN EXCHANGE MANAGEMENT ACT [FEMA], 1999
• Has Extensive applicability;
• Covers within its ambit all types of financial instruments and variety of financial
transactions;
• Endows legality to various transactions and dealings of foreign exchange and
illegality is punished as civil contravention;
• The Reserve Bank of India is rule making and regulatory body for the purpose of
implementation;
• Section 36- the establishment of Directorate of Enforcement for the purpose of
investigation into contraventions;
• Lacunas- the inclusion of the ground of “public interest” for revocation of orders or
for suspension of operation of the Act & the limited reach of execution authorities in
case of civil detention orders passed against extra-territorial entities .

13. CONTINUED…
4] THE PREVENTION OF MONEY LAUNDERING ACT, 2002 (AMENDED UP TO DATE) & RULES
• The milestone in Indian Counter Terrorism Financing measures because it lays down detail
provisions for punishing the offence of money laundering which is the most widely used
channels of terror funding;
• Has laid down a detailed mechanism for attachment, adjudication and confiscation of proceeds
of crime;
• Has enlisted the obligations of reporting entities like Banks and other financial institutions;
• Imposes monetary punishment for the non-compliance by the Reporting entities;
• Provides for reciprocal arrangement for assistance in certain matters;
• Comprehensive and consolidated piece of legislation;
• Suffers from lacunas such as Lack of stringent actions against reporting entities & very less
amount of punishment for grave offence like money laundering.

14. CONTINUED…
5] THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 [FCRA]
• Assumes importance because foreign contribution is a channel for state sponsored
terror funding & exploited under the garb of charity;
• Endowed with extra-territorial competence & encompasses broad and elaborate
definitions;
• Acceptance, Transfer & Delivery of Foreign Contribution is well regulated;
• Encompasses detail provisions with regard to the registration of non-governmental
organizations for the purpose of acceptance of foreign contribution;
• Provides punishment for civil contraventions as well as lays down penal provisions
for non-compliance;
• Unfortunately excludes of certain vulnerable sources of foreign contribution & fails to
include “terrorism financing” as one of the grounds for disqualification & cancellation
of Registration Certificate of NGOs.

15. CONTINUED…
6] THE INFORMATION TECHNOLOGY ACT ,2000 (AMENDED UPTO DATE)
• Amended in the year 2008 & included provisions dealing with cyber terrorism
(Sec.66 F) and national cyber security (Sec.70 A & 70 B);
• Nowhere it includes the offence of terrorism financing committed through
electronic medium;
• Does not contain any provision regarding regulation of virtual or electronic
currency & funds transfer through it;
• At present, no provision of the law deals with hate speech which incites youth
to follow terrorist ideology & radicalizes them to join terrorist networks.

16. EXECUTIVE INITIATIVES AND
POLICIES
ECONOMIC INTELLIGENCE COUNCIL
-The apex body ensuring inter-ministerial cooperation and
coordination to combat the menace of economic crimes and
threat to national security
-review and approval functions
-functions in the advisory capacity
FINANCIAL INTELLIGENCE UNIT (FIU-IND)
-Gathers and shares financial intelligence in close
cooperation with the regulatory authorities
-Seeks compliance under PMLA
-Receives and processes Suspicious Transactions Reports
THE ENFORCEMENT DIRECTORATE (ED)
-A specialized and premier financial investigation agency
-Enforces the Foreign Exchange Management Act, 1999 and
the Prevention of Money Laundering Act, 2002
THE NATIONAL INVESTIGATION AGENCY (NIA)
-The Central Counter Terrorism Law Enforcement and
Investigation Agency
-Established Under the National Investigation Agency
Act,2008
-Partners with national & international agencies
ENFORCEMENT
AGENCIES

17. CONTINUED…
B] THE ROLE OF THE RESERVE BANK OF INDIA (RBI)-
• issues Master Circular with regard to Know Your Customer (KYC) norms /
Anti-Money Laundering (AML) standards/Combating of Financing of Terrorism
(CFT)/Obligation of banks under PMLA, 2002;
• These Circulars are updated but are short-lived & have transitory value;
• Issued Master Direction - Know Your Customer (KYC) Direction, 2016;
• Has devised electronic reporting system which facilitates implementation of
FEMA;
• Issued Warning with regard to the Use of Virtual Currency;
• Mere Warning is not sufficient.

18. CONTINUED…
C] ROLE OF THE SECURITIES & EXCHANGE BOARD OF INDIA (SEBI)
• issued Guidelines for Anti-Money Laundering Measures;
• Obligates senior management of a registered intermediary to establish
appropriate policies and procedures for the prevention of money laundering
and terrorist financing and ensure their effectiveness and compliance with all
relevant legal and regulatory requirements.
• Unfortunately, these Guidelines are applicable only to the registered
intermediaries. The unregistered intermediaries are left out of its purview
whereas it is found that unregistered players play vital role in raising and
moving terror funds.
• The breach of Guidelines entails the liability of payment of monetary penalty
which is lenient way to punish the grave offence of terrorism financing.

19. CONTINUED…
D] DEMONETISATION POLICY
• The decision of RBI/Government to recall the status of a currency note to be
used as a legal tender.
• The Government of India announced it in the month of November 2016 with a
view to tackle the menace of black money/parallel economy/shadow economy
& to prevent the cash being used for terrorist activities/terror funding;
• Initially hit the roots of terrorism financing to some extent;
• Research shows that it is becoming responsible for changes in the use of
sources of terrorist funding;
• Only temporary cure but not a permanent death knell to terror funding.

20. SOCIAL POLICIES AND OUTLOOK
• India -the world’s largest democracy and a land of unity in diversity.
• Has cherished the democratic value of equality and inclusive attitude since
immemorial times;
• But today the Indian politics thrives on religious divisions and this ultimately fuels the
social and cultural divisions;
• Aggressive and exclusionary attitude towards religious minorities is breeding
discontent and inciting them to embrace terrorist ideologies;
• The lack of good governance and sympathetic administrative attitude towards them
silently supporting indirect involvement of people in terror financing activities;
• Lacks a consolidated social policy to assimilate the minorities into the mainstream;
• No sound and long-lasting policy to tackle the socio-legal issues arising out of
migrant crisis;
• Voices of victims of terrorism are neglected.

21. CONCLUSION
• Unfortunate reality that terrorism will keep haunting the humanity till infinity;
• Considering this, the counter-terrorism efforts of states should concentrate on
eliminating the root causes which fuel the terrorist violence & finances is one of them;
• Shortage of money obstructs successful implementation of evil terrorist intentions.
Therefore, countering terrorism financing assumes immense significance;
• India, being the victim of terrorism since birth, has strong foundation of legislative
enactments. It has taken its best efforts to translate its international commitments
into domestic laws and actions;
• However, the Indian legal framework dealing with terrorism financing is insufficient
and riddled with many lacunas;
• Unfortunately, India still has not framed any legal enactment dealing exclusively with
the offence of terrorism financing and enlisting the measures of countering it;

22. CONTINUED…
• The very grave subject of terrorism financing is dealt in piecemeal manner by
fragmented legislations and that too inadequately;
• Indian legal system dealing with cyber space and cyber crimes is in very nascent
stage & is lagging far behind of technological advancement.
• The lack of Indian Counter-Terrorism Financing policy has further augmented the
legal lacuna.
• The Indian operational and enforcement mechanism exhibits plurality of agencies,
who themselves suffer from various deficiencies like insufficient funding, inadequate
infrastructural facilities and lack of expertise human resource.
• The financial regulators are victims of bureaucratic rivalries, fierce competition and
conflict of jurisdictions;
• The temporary policies like Demonetization are not effective permanent solution;
• The hostile social policies and outlook are hampering effective implementation of law.

23. RECOMMENDATIONS
• Encoding all CTF mechanisms under the umbrella of single dynamic, adaptive,
flexible and efficient policy which shall provide for both social and legal avenues
targeted towards countering and thwarting financing of terror. The policy must
envisage participation of all players engaged in various arena of terrorism;
• Enactment of separate legislation which will solely and independently deal with all the
angles of the offence of terrorism financing;
• Law must understand and take cognizance of the facts that prompt normal people to
fund terrorist causes.
• Law must have inclusive approach & adopt an all-encompassing attitude;
• Law must take cognizance of extra-legal psychological, biological, cultural and social
factors influences, if it really wants to hit the bull’s eye in the context of terrorism
financing.