UPA Government’s soft handling of terrorists and their financiers has raised alarm bells in the international community. At least two authoritative global reports have pinpointed several inadequacies in India’s capability to guard itself against terrorism and recommended affirmative action to prevent terrorism.
“India continues to be a significant target for terrorist groups and has been the victim of numerous attacks. There are no published figures of terrorist cells operating in the country,” says a report on India’s Anti-Money Laundering (AML) and countering the financing of terrorism (CFT) legal framework.
The report titled Mutual Evaluation Report of India (MERI) has identified several deficiencies in the relevant Indian laws and regulations relating to CFT. The report has been prepared by a joint team of Financial Action Task Force (FATF) and Asia Pacific Group (APG) that visited the country in November-December 2009 and February 2010 for an on-the-spot examination of Indian AML/CFT mechanism.
FATF is a global AML organisation that inducted India as its member in June 2010. APG is a regional AML front of which India is a member since 1998.
Instead of making MERI public, the Government has tried to build castles in the air in its fight against terrorism.
On July 27, the Finance Ministry, in reply to a question in Rajya Sabha, stated that FATF membership would help “India to build the capacity to fight terrorism and trace terrorist money and to successfully investigate and prosecute money laundering and terrorist financing offences. India will benefit in securing a more transparent and stable financial system by ensuring that financial institutions are not vulnerable to infiltration or abuse by organised crime groups.”
Neither FATF nor APG has as yet made public MERI. FATF has only uploaded on its website MERI’s executive summary dated June 25, 2010.
Referring to statutory requirement for reporting Suspicious Transaction Report (STR) by banks and other entities, the report notes that STF filings appear to be extremely low in relation to the size of the country’s financial system and the scale of economic activity.
“Given India’s vulnerability to terrorism and the large number of actual terrorist attacks per year, the number of terrorist related STRs also appears to be extremely low, raising further questions about the implementation and effectiveness of the STR reporting obligation,” MERI says.
The report has noted that financing terrorism criminalisation in the country is in line with the FT convention.
“Confiscation of terrorist fund is deficient. UN RES (The United Nations resolutions against terrorism) not fully implemented,” it says. There are “concerns regarding preventive regime and judicial follow-up in terms of final convictions,” it adds.
MERI has appreciated Indian initiatives such as amendment of Unlawful Activities (Prevention) Act (UAPA) in 2008 to meet global norms on criminalisation of terrorist financing.
“Nevertheless”, the report says, “there are a number of technical deficiencies that need to be addressed to bring the offence more in line with the relevant international standards and thereby enhance the effectiveness of the CFT system itself.”
The report has recommended that the Government should criminalise the sole intentional financing of offences covered by the international treaties annexed to FT contention as terrorist financing.
“The UAPA offence of making demands for nuclear material, etc. should be included in the list of terrorist acts; the terrorist acts covered by the UAPA should also target international organisations; the attempt to commit the section 17 and section 40 UAPA offences should be fully covered; and the sole wilful financing of terrorist individuals and terrorist organisations as such, without requiring the specific intention or knowledge that the funds should or are to be used to commit a terrorist act, should be criminalised,” it adds.
The concern for the safety of hapless Indians is also clearly noticeable in US State Department’s (USSD) report titled ‘Money Laundering and Financial Crimes – Country Database May 2010’ (MLFCCD).
It suggests: “Given the fact that in India hawala is directly linked to terrorist financing, the GOI (Government of India) should take action to provide increased transparency in alternative remittance systems. India should take measures to demonstrate that it is also applying the full range of its AML/CFT measures to transactions conducted under the Asian Clearing Union with Iran and other participating countries. India should become a party to the UN Conventions against Transnational Organised Crime and Corruption.”
The USSD’s latest available ‘Country Reports on Terrorism’ released in May 2009, had ranked India as “among the world’s most terrorism-afflicted countries” in 2008.
The most damning lacuna in the lack of political will to prevent financing of terrorists through a web of non-government organisation (NGOs) and trusts, according to analyst.
This is largely due to two factors NGO-bureaucrat-politician nexus that creates dubious channels of money inflows and outflows and the minority vote bank politics indulged in by pseudo-secular parties, the analyst adds.
Both MERI and MLFCCD have, subtly dealt these issues under the generic term non-profit organisations (NPOs).
MERI puts Indian trusts into three categories private ones to benefit select persons, charitable ones including religious ones and Wakfs for “performing certain Islamic religious activities.”
It notes: “Indian authorities indicated that no statistics are available on the number of charitable or public trusts and wakfs.”
The report says that Indian law does not require those who perform trust services (primarily lawyers) to obtain, verify, or retain records on the beneficial ownership and/or control of trusts, or to retain copies of trust instruments. Consequently, there no measures guarantee that the competent authorities can obtain or access adequate and accurate information concerning the beneficial owners of private trusts in a timely fashion.
MLFCCD is more forthcoming on this issue. It observes: “Some religious trusts and charities operate as sources of funds for terrorist organisations under anonymous/fictitious names. There are over a million charitable and private organisations registered in India. There is insufficient integration and coordination between charities’ regulators and law enforcement authorities regarding the threat of terrorist financing.”
MERI has quoted the Government as saying that there are about two million domestic and foreign NPOs operating in India.
Noting that there is no unified database on NPOs, the report says: “India has not yet undertaken a review of its NPO sector, as envisaged by the FATF standards. There has been no effective outreach to the NPO sector by the Government of India or by State Governments in relation to risks and vulnerabilities of the sector to terrorist financing abuse.”
The report points out that the Government has not demonstrated that measures are in place to sanction violations of oversight measures or rules by NPOs or persons acting on behalf of NPOs for NPOs other than those registered under the Income Tax Act and under the FCRA. The majority of NPOs are not registered as such with government agencies, including the tax authorities.
MLFCCD suggests “India should pass the Foreign Contribution Regulation Bill for regulating nongovernmental organisations, including charities.”
To appease NGOs, UPA has put the proposal to substitute outdated Foreign Contribution (Regulation) Act, 1976 with a new law, though the Foreign Contribution (Regulation) (FCR) Bill 2006 on the backburner.
No update is available in the public domain on the fate of this delayed Bill.
As for international cooperation in dealing with terrorist financers, MERI says: “Terrorist financing and terrorist acts are also extraditable offences, but the deficiencies in the definitions and criminalisation of FT may affect the ability to extradite when the dual criminality test is applied.”
MERI report is an evaluation of India’s compliance with country’s compliance with FATF’s long-standing 40 recommendations on AML and nine special recommendations on CFT.
The report has found India complaint only with four recommendations, largely compliant with 25 other recommendations and partially complaint with 15 other recommendations.
The country is non-complaint with four recommendations. And the balance one is not applicable to the country.