Terrorism Financing Through Informal Networks
I. Introduction
Terrorism financing through informal networks involves raising, moving, or using funds to support terrorist activities outside formal banking systems. These networks often include:
Hawala / Hundi systems (informal money transfer)
Charitable organizations misused for funding
Cash smuggling and trade-based money laundering
Such methods make tracing, seizure, and prosecution difficult, requiring a combination of criminal law, anti-money laundering laws, and counter-terrorism legislation.
II. Legal Framework in India
1. Primary Statutes
Unlawful Activities (Prevention) Act (UAPA), 1967 / 2008 Amendment
Criminalizes financing of terrorism and membership in terrorist organizations.
Section 18: Punishment for raising funds for terrorist acts.
Prevention of Money Laundering Act (PMLA), 2002
Section 3 & 4: Offense of money laundering including indirect support for terrorism.
Section 17: Attachment of property involved in financing terrorism.
Foreign Contribution (Regulation) Act (FCRA), 2010
Controls foreign funds and donations; prevents misuse by terror groups.
Indian Penal Code (IPC)
Section 120B: Criminal conspiracy
Section 153A: Promoting enmity between groups
2. Informal Financial Networks
Hawala networks: Transfers money without formal banking; relies on trust and ledgers.
Charities / NGOs: Donations diverted to extremist activities.
Trade-based money laundering: Over/under-invoicing of imports/exports to funnel funds.
III. Landmark Cases
1. Abdul Karim Telgi Hawala Scam Case (2001–2003)
Facts:
Telgi operated a hawala network for stamp paper fraud, diverting money for organized criminal activity.
Hawala transactions were suspected to fund anti-national elements indirectly.
Legal Proceedings:
Convicted under IPC Section 420 (cheating), Section 120B (conspiracy), and Prevention of Corruption Act.
Significance:
Highlighted the link between hawala networks and potential terror financing.
Underlined the role of investigative vigilance in tracking informal networks.
2. 2001 Indian Parliament Attack – Terror Financing Case
Facts:
Terrorists attacked Parliament in December 2001; investigation revealed funding through hawala channels.
Legal Proceedings:
Convictions under UAPA Section 18 (raising funds for terrorism) and IPC Sections 120B, 302.
Several intermediaries who facilitated transfers were prosecuted.
Significance:
Reinforced UAPA as a primary tool against terror financing.
Set precedent for tracking informal networks using financial intelligence units (FIU-IND).
3. POTA Cases – 2002 Mumbai Bombings Funding
Facts:
Investigations revealed hawala operators and NGOs funding the 2002 Mumbai blasts.
Funds often transferred abroad via informal channels.
Verdict:
Perpetrators convicted under Prevention of Terrorism Act (POTA) and UAPA.
Confiscation of assets under PMLA 2002.
Significance:
Demonstrated cross-use of multiple statutes to target terrorism financing.
Showed challenges in proving intent in informal fund transfers.
4. Jamaat-ud-Dawa / Lashkar-e-Taiba Funding Case (2008)
Facts:
Funds for 2008 Mumbai attacks traced to charitable organizations operating as fronts.
Donations collected both domestically and internationally via informal channels.
Verdict:
Individuals and NGOs charged under UAPA Section 18, IPC Section 120B, and PMLA Section 3.
Freezing of bank accounts and seizure of assets facilitated under PMLA and FCRA.
Significance:
Showed misuse of charitable organizations as informal financial networks for terrorism.
Courts upheld asset forfeiture and strict compliance with anti-money laundering measures.
5. Hawala Funding of Kashmir Terrorism (2009–2011)
Facts:
Arrests of hawala operators transferring funds to militants in Jammu & Kashmir.
Funds sourced from India and abroad, avoiding the banking system.
Verdict:
Convictions under UAPA Section 18 and IPC Section 120B.
Seizure of hawala assets and prosecution of intermediaries.
Significance:
Established that hawala networks are prosecutable even without physical movement of cash.
Courts emphasized intention and connection to terrorist activity rather than mere financial transaction.
6. Jaish-e-Mohammed Funding Case (2016)
Facts:
Post Pathankot attack, investigation revealed terrorist funding through informal hawala channels and trade mis-invoicing.
Verdict:
Convictions under UAPA, PMLA, IPC Section 120B.
Property attached under PMLA.
Significance:
Modern example of multi-jurisdictional terror financing prosecution.
Reinforced the importance of international cooperation in tracking informal networks.
IV. Judicial Principles Established
Criminal Liability Without Formal Banking Transactions
Informal transfer through hawala or charities still constitutes offense under UAPA / PMLA.
Intention is Key
Courts focus on whether funds were intended for terrorism, not merely on financial mismanagement.
Asset Forfeiture and Confiscation
PMLA allows attachment of property even before conviction in terror-financing cases.
Conspiracy Application
Section 120B IPC invoked for network operators, intermediaries, and conspirators.
International Cooperation
FIU-IND coordinates with FATF, INTERPOL, and UN Sanctions for tracking cross-border informal funding.
V. Summary Table of Cases
| Case | Year | Network | Law Invoked | Significance |
|---|---|---|---|---|
| Abdul Karim Telgi | 2001–03 | Hawala | IPC 420, 120B | Link between hawala and criminal funding |
| Parliament Attack | 2001 | Hawala | UAPA 18, IPC 120B | Terror financing via informal channels |
| Mumbai Blasts | 2002 | Hawala, NGOs | POTA, UAPA, PMLA | Multi-statute prosecution for terror funding |
| LeT/Jamaat-ud-Dawa | 2008 | Charities | UAPA 18, IPC 120B, PMLA | Misuse of charities for terrorism |
| Kashmir Funding | 2009–11 | Hawala | UAPA 18, IPC 120B | Hawala networks prosecuted without cash evidence |
| Jaish-e-Mohammed | 2016 | Hawala / Trade | UAPA, PMLA, IPC 120B | Modern cross-border informal funding |
VI. Key Takeaways
Informal networks like hawala and charities are primary conduits for terror financing in India.
UAPA and PMLA form the backbone of legal response, with IPC Sections 120B and 34 supplementing.
Courts have consistently held that intent to fund terrorism is sufficient for conviction, even without traditional banking evidence.
Asset forfeiture, surveillance, and international cooperation are essential for effective prosecution.
High-profile cases demonstrate multi-agency coordination between police, FIU-IND, ED, and NIA.
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