Targeting Hawala

While the higher echelons of power in Jammu and Kashmir (J&K) were consumed by a political debate over the partial removal of Armed Forces Special Powers Act (AFSPA) from some of its areas, a more significant development has taken place which could have dramatic bearing on the residual militancy in the state. The terror funding mechanism in the state has been brought under the close scrutiny of enforcement and intelligence agencies.

In August 2011, the union minister of state for home, Jitendra Singh, had stated in the Lok Sabha, “A multi-disciplinary group at the state and central level has been entrusted with the responsibility of enquiring into the sources of funding of Kashmiri terrorists.” Officials at the ministry of home affairs (MHA) further indicated, “Special attention was being paid for terror funding of separatists and terror groups in Kashmir and the constitution of Combating of Funding of Terrorists (CFT) is a step in this direction.” Besides this, a Terror Funding and Fake Currency (TFFC) Cell in the National Investigation Agency (NIA) has also been constituted, to focus on investigating the flow of money into anti-national activities.

Meanwhile, the Enforcement Directorate (ED) on November 1, 2011, booked four traders, engaged in business across the Line of Control (LoC), under the Prevention of Money Laundering Act (PMLA), in connection with a hawala (illegal money transfer) racket for the Lashkar-e-Toiba (LeT). The ED had sent one of its senior officers to the Valley to review hawala cases, and decided to take up this case which dates back to 2009. Notably, J&K Police had uncovered this hawala network in 2009, and had identified traders and businessmen in Punjab and Jammu who allegedly channelled funds to LeT militants in the Kashmir valley for a fee.

This is the first such case taken up by the ED after cross-LoC trade was opened on October 21, 2008. Significantly, a high-level meeting, chaired by union home secretary R.K. Singh in Srinagar in the evening of October 23, 2011, reviewed all cases related to the funding of terrorist and separatist groups in J&K, and agencies were asked to work in close coordination with the ED for attachment of properties under PMLA.

Terror groups have long taken advantage of the absence of legal banking facilities for trade across the LoC, which is based on a barter system. “As the cross LoC trade seems to have improved the relations between the traders on both sides of the dividing line, the same has been misused by many by acting as conduits of passing hawala money into the state, meant for militants and separatist groups,” the state government said in the J&K Legislative Assembly on September 27, 2011. Media reports indicate that goods worth Rs 2.94 billion have been exchanged on the Srinagar-Muzaffarabad route since the trade began.

According to data furnished by the state government, 48 persons have been found involved in misusing the trade across the LoC and an amount of Rs 7.3 million as well as un-cashed cheques worth Rs 100,000, have been recovered from these persons in a total of 20 cases since January 1, 2009 (data till July 31, 2011). In the most prominent case, four persons associated with Hizb-ul-Mujahiddeen (HM), were arrested in Srinagar along with Rs 2.1 million. A Special Cell unit of the Delhi Police had gone to Srinagar on January 22, 2011, following information that the money from Pakistan was being sent to J&K through a hawala channel via Delhi, for funding of terrorism and secessionists activities.

The numbers become more worrisome when data related to other sources of hawala money are clubbed together with such transactions in the cross-LoC trade. The state government has disclosed that a total of 98 persons were arrested and an amount of Rs 12.3 million was recovered over the January 2009 – July 2011 period, as part of efforts to check the pumping of hawala money into J&K. In addition to Indian currency, the agencies recovered 73,500 Saudi Arabian Riyal, Euro notes of 500 denomination valuing Rs 150,000, 2,000 UK pounds and cheques worth Rs 50,000. While 28 cases were registered and 66 persons were arrested, with a seizure of Rs 7.7 million, in 2009, the number of cases registered in 2010 stood at 10, with 15 persons arrested and a recovery of Rs 998,500. Nine cases have been registered in 2011 (till July), with 17 arrests and a seizure of Rs 3.6 million.

The arrested persons belonged to both separatist groups and terrorist outfits. The separatist groups involved included the All Parties Hurriyat Conference-Geelani (APHC-G), led by Syed Ali Shah Geelani; Kashmir Mass Movement; the Sajad Gani Lone led People’s Conference; Shabir Ahmad Shah’s Democratic Freedom Party (DFP); the Yasin Malik led Jammu Kashmir Liberation Front (JKLF); the Islamic Students Front; and Mahz-e-Azadi. The terrorist organizations involved included HM, Al-Badr, LeT, Jaish-e-Mohammad (JeM), Tehreek-ul-Mujahideen (TuM), Al-Umer, Jamiat-ul-Mujahideen (JuM), Al-Burq and Islamic Front.

The most prominent among Kashmir’s separatist leaders, Geelani, has been under scrutiny for a long time. The first First Information Report (FIR) against him, in relation to hawala transactions, was filed in 1997, alleging that he had violated the Foreign Contributions (Regulation) Act (FCRA) by receiving Rs 194 million from Saudi Arabia; and a separate donation of Rs 100 million from the Kashmir American Council (KAC). These payments, the FIR alleged, were collected from hawala dealers in New Delhi. Significantly, Syed Ghulam Nabi Fai, the Executive Director of KAC, has been charged by US authorities for operating as an agent of a foreign intelligence agency, specifically, Pakistan’s Inter Services Intelligence (ISI).

Geelani was brought under the scanner again following disclosures made by his close aide, Ghulam Mohammed Bhat, arrested on January 22, 2011, in connection with an alleged hawala racket, used to channel money to HM terrorists in the Kashmir Valley. Rs 2.1 million was recovered from Bhatt in this connection. Bhatt told interrogators that he had received Rs 4 million from his hawala contact in mid-September 2010. The money was to be delivered to another contact at Srinagar’s Jhelum Valley College “for onward delivery to S.A.S. Geelani”. Bhat also claimed that Geelani received sums of Rs 2 million six times between October 2009 and January 9-10, 2011. Meanwhile, the NIA, on July 20, 2011, charge sheeted Bhatt, along with three others (arrested earlier), in connection with this hawala racket. One of the charge sheeted persons, Mohd Sidiq Ganai, had allegedly collected over Rs 45.7 million during a period of three years, since January 2008, through hawala channels from Pakistan, to promote terrorist activities in the Valley. The charge sheet stated that funds through hawala channels were being sent to Jammu and Kashmir for funding terror and secessionist acts in the state and Pakistan-based Maqbool Pandit, a member of HM, and Aizaz Maqbool Bhat, at present living in Saudi Arabia, were the key accused behind these operations. Though the NIA has not named Geelani as an accused in their charge sheet, a "further probe" is on into his role.

Another separatist leader, Yasin Malik was arrested by Police on March 25, 2002, on charges relating to hawala transfers. He was booked under the Prevention of Terrorism Ordinance (POTO). The arrest took place following the March 24, 2002, arrest of Mushtaq Ahmed Dar, a JKLF activist, by Udhampur Police at Kud, along with a woman, Shazia Begum, who were carrying USD 100,000 for Yasin Malik. Dar disclosed that about USD 400,000 had been collected by Yasin Malik during his month-long stay in America in October-November 2001, where he had gone for treatment. The money was collected from businessmen of a particular community on the pretext of pursuing the ‘Kashmir cause’. The amount was brought to Nepal from Pakistan by a Kashmir based separatist, Altaf Qadiri, and handed over to Dar at a hotel in Kathmandu (Nepal). All the accused were later released on bail. The case is still going on.

Investigations over the years have also established that, apart from Geelani and Malik, other separatist leaders, including the slain APHC leader Abdul Gani Lone, his two sons, Bilal Gani Lone and Sajid Gani Lone, and Maulana Abbas Ansari, have also received hawala money.

Recent revelations have further exposed the real colour of the separatist leadership that claims itself as the “true representatives” of the Kashmiri people. A Delhi based hawala conduit, Hira Lal, arrested from a hotel in Srinagar along with Fake Indian Currency Notes on April 15, 2011, told his interrogators that separatists-turned-politicians have been siphoning off ISI funds meant for terrorist activities for their personal use. According to sources, Hira Lal was getting money from the Pakistan High Commission in New Delhi and was handing over the money to brothers Bilal and Sajjad Lone. Quoting Hira Lal, an unnamed Police officer disclosed that the conduit had passed on Rs 20 to 30 million to the Lone brothers since the killing of their father by the LeT in 2001.

Nasir Shafi Mir, a resident of Budgam district, who ostensibly used the carpet trade and later a money exchange business in Dubai for transferring hawala money to Hurriyat leaders and other separatists in Kashmir, is said to be the "financial brain" behind funding of separatist activities in Kashmir. His name cropped up when the government was examining the role of KAC’s Gulam Nabi Fai. Fai was arrested by the FBI on July 19, 2011, on charges of illegally lobbying the US government for Pakistan over Kashmir. Fai was released on bail on July 27, 2011.

Hawala, the informal transfer of money, has been in existence for almost three centuries in India and other Asian countries. In the recent past, Kashmir has emerged a prominent locus for such transactions, as extremist outfits in countries grouped under the Organization of Islamic Countries (OIC) send money to terrorist groups in the state. Intelligence agencies estimate that about 90-95 percent of extremist funding comes through this channel, with Pakistan and Saudi Arabia the primary sources of these illegal flows. Praveen Swami noted in a 1997 article, “Since the 1991 arrests of Ashfaq Lone and Shahabuddin Ghowri in New Delhi on charges of channelling hawala funds to Kashmir terrorist groups blew the lid off the Jain brothers' hawala scandal, it has been known that illegal inflows have been central to sustaining terrorism in Kashmir.”

Unsurprisingly, intelligence reports indicate that hawala money was used to fuel the summer unrest of 2010, the effort by separatist formations to supplement rapidly declining terrorist capabilities in the state with violent mass mobilisation. After the arrests of three hawala conduits on January 23, 2011, and the seizure of Rs 2.1 million from them, it was discovered that this money was being sent to J&K via Delhi by the ISI for ‘stone-pelters’ – violent street demonstrators – to sustain unrest in the Valley. During interrogation, the hawala operatives revealed that “the money is delivered to several leaders in Jammu & Kashmir to further give it to local politicians to stage violent protests and create law and order problems. As per their disclosure, approximately Rs 20 lakh [Rs 2 million] is sent every month, over one crore [100 million] every year. This money is given to conduits here in Delhi by the Delhi-based dealer and then it goes to Jammu & Kashmir.” Officials said that, during unrest in Valley, between June and September each year since 2008, stone pelters were hired using money sent by ISI.

Measures taken by the government has resulted in some decline in the number of hawala cases, which have come down to 10 in 2010 and nine in 2011, at the time of writing, as against 28 in 2009. Some of the prominent steps initiated by the government include the installation of modern equipment to monitor the LoC trade and travel points; the issue of guidelines to enforcement and banking agencies to track and check suspicious bank accounts; and the establishment of nakas (barricades) at various places in the state for effective checking of the movement of contraband, including illegal funds. The ED has dispatched officials to the state to fast-track the probe into 18 hawala related cases and to detect possible violations of PMLA – perhaps the first time the ED has deputed senior officials to the Valley for such investigations. The establishment of CFT and TFFC also suggests a renewed seriousness on the part of the Centre.

At a time when terrorism is at its lowest ebb in J&K, an effective blockade against illicit fund transfers to terrorist and separatist organizations could have a decisive impact on the possibility of constructing an enduring peace in the state. There are clear indications of a measure of determination to address this issue, and it is imperative that this should be sustained. In the past, investigations and prosecutions have been undermined or indefinitely deferred on extraneous political considerations, and it can only be hoped that this will not be the case again. The comprehensive dismantling of the hawala networks in J&K could inflict a death blow on terrorism and separatism in J&K.