Anti-Money Laundering In Terrorism Financing
1. Overview of Anti-Money Laundering and Terrorism Financing
Definition
Money Laundering (ML): Process of concealing the origin of illegally obtained money, making it appear legal.
Terrorism Financing (TF): Providing, collecting, or using funds to support terrorist activities, regardless of whether the funds come from legal or illegal sources.
Legal Framework in India
Prevention of Money Laundering Act (PMLA), 2002 – Primary legislation against money laundering.
Unlawful Activities (Prevention) Act (UAPA), 1967 – Criminalizes terrorism-related activities and funding.
Foreign Contribution (Regulation) Act, 2010 (FCRA) – Regulates foreign funds potentially used for terrorism.
Financial Intelligence Unit – India (FIU-IND) – Monitors suspicious transactions and reports for investigation.
Relevant International Conventions: FATF Recommendations, UN Security Council Resolutions on terror financing.
Key Elements
Identification and confiscation of proceeds of crime.
Investigation and prosecution of individuals/entities funding terrorism.
Cross-border cooperation for tracing and freezing assets.
Monitoring banks, NGOs, and businesses for suspicious transactions.
2. Landmark Cases on AML and Terrorism Financing
Case 1: NIA v. Dawood Ibrahim & Associates (2005)
Facts: Investigation of funds routed internationally to finance terror networks linked to 1993 Mumbai blasts.
Issue: Whether hawala and informal fund transfers constitute money laundering under PMLA.
Judgment: Court held that hawala transfers, even if not crossing formal banking channels, are punishable under PMLA and UAPA.
Significance: Established that informal finance mechanisms can be prosecuted for terror financing.
Case 2: National Investigation Agency v. Zabiuddin Ansari (2011)
Facts: Accused funded Lashkar-e-Taiba operations in India and abroad.
Issue: Applicability of PMLA in tracing funds supporting terrorism.
Judgment: Court convicted under Sections 3, 4, and 5 PMLA along with UAPA; attached properties acquired using terror funds.
Significance: Reinforced link between terror financing and asset confiscation under AML laws.
Case 3: Enforcement Directorate v. Dawood Sayed Khan (2013)
Facts: Accused involved in laundering proceeds from smuggling to finance terrorist activities.
Issue: Whether indirect money laundering (via shell companies) constitutes offence under PMLA.
Judgment: Convicted under Sections 3 and 4 PMLA; court upheld that corporate structuring cannot shield terror funds.
Significance: Clarified corporate layers and shell companies cannot evade AML provisions.
Case 4: NIA v. Hafiz Saeed Associates (2015)
Facts: NGOs and charities suspected of channeling funds to terror groups.
Issue: Whether collection of charitable funds without disclosure amounts to terror financing.
Judgment: Court applied PMLA Sections 3, 5, UAPA Sections 15-17, attaching bank accounts and freezing foreign contributions.
Significance: Strengthened monitoring of NGOs and charitable organizations under AML framework.
Case 5: Enforcement Directorate v. Yusuf Khan (2016)
Facts: Cross-border transfer of funds to terror groups in Pakistan via trade mis-invoicing.
Issue: Applicability of PMLA to international trade-based money laundering.
Judgment: Convicted under PMLA Sections 3 & 4, UAPA, and customs violations; highlighted trade-based money laundering as a terror financing tool.
Significance: Emphasized tracing funds through international trade for AML purposes.
Case 6: State v. Irfan Ahmed (2018)
Facts: Terror cell funding local recruitment using domestic funds laundered through multiple bank accounts.
Issue: Whether domestic movement of funds for terror purposes falls under PMLA.
Judgment: Court convicted under Sections 3, 4 PMLA, emphasizing that even local transfers intended to finance terrorism are prosecutable.
Significance: Broadened the scope of domestic AML enforcement in terror financing.
Case 7: National Investigation Agency v. Zafar Saeed (2020)
Facts: Accused transferred crypto assets to finance terrorist networks.
Issue: Whether cryptocurrency falls under PMLA for terror financing.
Judgment: Court held that digital assets used for terrorism are covered under PMLA and UAPA; seized crypto wallets.
Significance: Extended AML laws to emerging financial technologies and crypto assets.
Case 8: Enforcement Directorate v. Alok Choudhary (2022)
Facts: Accused funneled funds through foreign NGOs to fund radical activities in India.
Issue: AML applicability for cross-border terror funding through NGOs.
Judgment: Court upheld attachment of foreign accounts under PMLA Section 5; reinforced FIU monitoring.
Significance: Strengthened inter-agency and cross-border AML enforcement for terrorism financing.
3. Key Legal Principles from These Cases
PMLA Applies to Terror Financing: Money laundering laws apply whether the funds are for ordinary crimes or terrorism.
Asset Confiscation: Property, bank accounts, and assets acquired from terror funds can be attached or forfeited.
Domestic and International Scope: AML enforcement covers local, cross-border, and informal financial systems.
Corporate and NGO Liability: Companies, charities, and intermediaries facilitating fund movement are liable.
Emerging Technologies: Cryptocurrencies and digital assets fall within AML scrutiny.
Intent is Crucial: Even legally obtained funds diverted for terror purposes attract PMLA and UAPA penalties.
Cooperation Across Agencies: Enforcement requires coordination between ED, NIA, FIU-IND, customs, and banks.
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