Col. Vivek Chadha (Retd.), Senior Fellow, Manohar Parrikar Institute for Defence Studies and Analyses (MP-IDSA), spoke on “No Money for Terror”: Challenges and Strategies at the Monday Morning Meeting held on 21 November 2022. The session was moderated by Dr. Uttam Kumar Sinha, Senior Fellow, MP-IDSA. Maj. Gen. (Dr.) Bipin Bakshi (Retd.), Deputy Director General, MP-IDSA, and scholars of the institute were in attendance.

Executive Summary

Terror financing is a multifaceted and transnational security challenge for states, gaining prominence in the aftermath of the 9/11 attacks. It has been a constant issue of debate in three significant events organised over the past month – the 90th Interpol General Assembly, the United Nations Security Council Counter- Terrorism Committee’s Special Meeting, and the “No Money for Terror” Ministerial Conference. Furthermore, it must be noted that corruption levels in a society determine the severity and scale of operations of terror funding practiced by individuals or groups, and hawala networks are considered the most efficient way for perpetrators to transfer money illegally. Cryptocurrency is gaining prominence as a chosen medium of money transfers. Finally, the main takeaway would be that to succeed in dismantling terror finance networks; states worldwide must ensure that the costs imposed on terror funding outweigh the incentives involved.

Detailed Report

Dr. Sinha introduced the topic of the Monday Morning Meeting by highlighting the recently organised “No Money for Terror” Conference, hosted in New Delhi from 18-19 November 2022. He emphasised that the opening and concluding remarks by the Indian Minister of Home Affairs, Mr. Amit Shah were impactful, high on content, and indicated a clear sense of direction. He spoke about how the world is undergoing a permacrisis, i.e., an age of constant upheaval.

Following the brief introduction, the Dr. Sinha gave the floor to Col. Chadha.

Initially, the speaker briefly delved into the three most recent and major conferences about terrorism and terror finance conducted within one month – “No Money for Terror”, the UNSC Counter-Terrorism Committee’s Special Meeting resulting in the Delhi Declaration, and the 90th Interpol General Assembly. He contextualised these events within the trend of renewed focus on terrorism finance and hinted at how it has gained prominence as a critical issue post-9/11.

While discussing Interpol’s 90th General Assembly, he shed light on how the resolution unveiled after the meeting drew to a close, linked corruption, crime, and terror funding as crucial factors in an interwoven model. The meeting also focused on the need for global responses to such problems due to financial systems’ interconnectedness. Corruption is the core enabler within this dynamic, and the more corrupt a society is, the easier it becomes to undertake, among other activities, financial crime.

Next, he underlined the critical features of the Delhi Declaration, where crowdfunding for terror purposes was one of the highlights of the 35-para document. In this context, it must be understood that there are traditional, anonymous, decentralised, and untraceable crowdfunding methods, including the hawala networks.

Subsequently, he shifted the focus to the “No Money for Terror” Conference, primarily PM Modi and Home Minister Shah’s speeches. In his inaugural address, PM Modi spoke about the key challenges facing the world. This includes cyber terrorism, how poorer nations bear the brunt of terrorism, the use of terrorism as state policy by some countries, and the link between money laundering, terror funding, and crime. It was reiterated by the speaker that corruption remains the enabler factor for crime and money laundering.

As indicated by the Prime Minister’s Address, specific approaches were highlighted to bring out the salience of the above mentioned threats. For example, criminal actors use technology as an enabler, while it is a solution for enforcement agencies. Additionally, multilateral forums should be employed to create consensus and pressure on countries like Pakistan and China with double standards on terrorism and create a uniform and straightforward approach to counter this threat. This is keeping in mind that the China-Pak nexus has long been undermining efforts to do so by blocking proposals at the UNSC.

Furthermore, it was understood that a unified approach to countering terrorism could not be adopted unless this double-standard approach ends. Additionally, dismantling terror financing networks was also raised as an important issue while at the same time emphasising that terrorism as an issue is far more critical than terrorists committing an act of violence. Finally, there is a need to prevent the exploitation of systemic differences between various stakeholders by hostile actors, and attempts to reduce such fissures to the greatest possible extent must be made.

Col. Chadha also brought to the fore the five-point strategy unveiled by the Home Minister to counter terror financing, which was the crux of his address. It has been highlighted below.

• Establishing a comprehensive monitoring framework involving cooperation and coordination between intelligence and investigative agencies.
• Trace, Target, and Terminate.
• Strengthening and harmonising the legal structure, akin to the Unlawful Activities Prevention Act that clearly defines a terrorist act and allows for the prosecution of guilty individuals under its guidelines.    
• Mechanisms against misuse of next-generation technology.
• A legal and regular framework for self-recovery.

The speaker also spoke about the four characteristics of terror funding, including the legality of the origins of terror money, its involvement in the exploitation of financial systems, and religion as a crucial motivator within this scenario. Moreover, it is fast-evolving and minimal funds are needed to carry out a terror strike. He further talked about how terror finance will find the path of least resistance.

He deconstructed the hybrid model of the terrorism finance cycle, highlighting the three core elements of terror funding, i.e., sources, the transfer mechanism and distribution. According to him, hawala networks and legal transfer remain the leading and efficient methods used in terror financing.

Cryptocurrency has also been used individually or alongside hawala networks to sustain terrorism. It is incredibly challenging, nonetheless, to trace and track cryptocurrency exchanges. This dilemma is exacerbated by its uneven implementation despite Financial Action Task Forces’ regulation number 15 concerning its regulation and legalisation. For this regulation to take effect, service providers have to be registered and regulated. More worryingly, no standards have been set for its use. As a result, fissures such as these are bound to be exploited, the effects of which are already visible. Over the years, there has been a surge in terror funding cases related to cryptocurrency, from 5 to 20 per cent.

However, hawala is considered by the speaker to be more efficient because of how difficult its transactions are to trace and track. Moreover, it cannot be regulated, especially in countries like India, where it is deemed illegal.

There are also local and global funding methods deemed equally effective, including extortion and crime occurring locally and those that permeate geographical boundaries. Furthermore, regulated and unregulated sources of terror financing work together to sustain the system, alongside land and air transfers (for example, through drones) and legal and electronic sources; the lattermost might not always be regulated across borders.

Here, it is vital to understand that terrorists will exploit emerging trends, protocol lacunae, information fissures, and a divided house. To counter this, agencies must look at emerging trends for lessons and implementation, create global protocols, improve methods of information sharing, and ensure unity of action.

Q/A Session

Dr. Sinha expressed his gratitude to the speaker for his detailed presentation and raised a question about how MP-IDSA can offer a fresh perspective, through intelligence analysis, about creating security architecture and legal and financial systems to counter terror financing. Afterwards, he invited questions from the attendees.

The Q/A session broadly revolved around themes such as information sharing challenges faced on a national level, the narco-terror factor within terror financing, and the linkage between climate change and terror financing or climate change and terrorism. It also examined difficulties facing India in multilateral formats like the Shanghai Cooperation Organisation in addressing its security concerns, considering that Pakistan and China are permanent members of this forum. Finally, the speaker gave insightful responses to comments and questions received from the participants.

This report was prepared by Ms. Saman Ayesha Kidwai, Research Analyst, Counter-Terrorism Centre, MP-IDSA.