Answer:

Introduction:

According to IMF, Money laundering is the process of concealing the illicit origin of proceeds of crimes whereas Terrorist financing is the collection or the provision of funds for terrorist purposes. Money launderers and terrorist financiers take advantage of weaknesses and differences in national Anti-Money Laundering systems for transferring funds to or from jurisdictions with weak or ineffective legal and institutional frameworks.

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Money Laundering Linked to Terror Financing

• Hawala Transactions: The hawala system, a traditional form of informal fund transfer, has often been misused to channel funds for terror activities. For example, in the 26/11 Mumbai attacks, hawala routes were reportedly used to finance the terrorists.
• Cryptocurrencies: The anonymous nature of cryptocurrencies such as Bitcoin has made it easier for terror groups to receive funding. The lack of a central governing body makes tracing difficult, as seen in the case of ISIS using Bitcoin for fundraising.
• Organised crimes: Illegal trade of goods like gold, drugs, and arms can generate proceeds that are laundered and sent to finance terror outfits.
• Foreign Funding: Money laundering often involves multiple countries, and foreign funds can be directed towards terrorism in India. Funds from Pakistan-based organisations like LeT are an example.
• Non-Profit Organisations: Some NGOs serve as fronts for laundering money and directing it to terrorist activities. For example, the Jammu and Kashmir Affectees Relief Trust was accused of funnelling funds to militants in the Kashmir Valley.
• Gold and Precious Metals: These are purchased using illicit funds and later sold to generate “clean” money. In Kerala, multiple gold-smuggling cases have been linked to terrorist funding.
• Real Estate Investments: Money laundered through real estate not only helps in parking large sums of money but is also used for terrorist activities. Investigations into the 2008 Mumbai attacks revealed such links.

Countermeasures to Break the Link

• Strengthen Anti-Money Laundering (AML) Laws: India amended the Prevention of Money Laundering Act (PMLA) in preparation for the 2023 FATF evaluation, aligning with 2008 RBI KYC guidelines and introducing increased disclosures for non-governmental organisations.
• Crackdown on Hawala Operations: The dismantling of a hawala racket related to terror financing in Jammu and Kashmir shows the urgency for a more comprehensive, technology-driven approach to monitor and break down such operations.
• Transparency in Real Estate: The Nirav Modi scam in 2018 highlighted how real estate can be a vehicle for money laundering. Adopting blockchain technology, as has been done in Andhra Pradesh for land records, can greatly enhance transparency in property transactions.
• Public-Private Partnerships: The existing collaboration between the National Crime Records Bureau and cybersecurity firms should be expanded to include monitoring of financial crimes, offering a multidimensional approach to fighting money laundering.
• Revamp Non-Profit Regulations: Charitable organisations can be misused for laundering money. Therefore, a rigorous vetting process should be in place for all NGOs and non-profits, with a centralised database monitoring donations and expenses to ensure no illicit money flows through these organisations.
• International Cooperation: India’s active role in the FATF provides a platform for intelligence sharing. This has been proven effective in tracking international criminals which should be leveraged more extensively for combating money laundering linked to terrorism.

Conclusion

By adopting cutting-edge technology, enhancing legal frameworks, and fostering international cooperation, India has the potential to sever the link between money laundering and terror financing effectively. These multi-pronged strategies signify a promising future in combating these interconnected threats to national security.

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