Counterfeit currency & financing of terror

The Financial Action Task Force (FATF) in its Report of June 2013, quoting the report of UNODC (2012), observed that "Currency Counterfeiting and Money Laundering have the potential to destabilize the national economies and threaten global security as they are key ways in which terrorists and other criminals finance their activities and conceal their profits."

K Subrahmanyam, in the Chapter on 'External Security,' in India; Vision 2025 (Planning Commission, 2003) wrote that the flow of fake currency into India, where cash transactions dominate at ground level and black money constitutes a significant proportion of the economy, presents two kinds of threats: First to our economy, and secondly, the fake currency enables the adversary to obtain the services of individuals and groups to act against our security interests at very low cost to itself. Once such conduits are established they are used to push in drugs, explosives, weapons and trained terrorists.

In February 2014, the Finance Minister informed the Rajya Sabha that counterfeit Indian currency notes worth Rs107.33 crore (US$ 17 Million approximately) were seized between January 2010 and June 2013. Fake Indian Currency Notes (FICN) printed in Pakistan are smuggled into India through couriers via Bangkok, Kathmandu and Dhaka Airports. According to reports of Indian Intelligence Agencies, organised crime syndicates push FICN through China, Malaysia, the UAE, Denmark, Netherlands, Singapore and Sri Lanka.

The Research and Analysis Wing (R&W), the Intelligence Bureau (IB), and the Directorate of Revenue Intelligence (DRI), informed Parliament's Standing Committee on Finance that fake banknotes of mostly Rs 500, Rs 1000 and now Rs 2000 denominations are printed in Pakistan and circulated in India by the ISI through the underworld and terror operatives. The Committee was informed about the involvement of Pakistan in the manufacture and supply of FICN for financing terrorist activity in India. They were further informed that several terrorists owing allegiance to groups such as Lashkar-e-Taiba (LeT), Al Badr, HUJI, Harkat-ul-Jihad-e-Islami. Hizbul Mujahideen (HM) and the crime syndicate of Dawood Ibrahim, were found carrying Fake Indian Currency Notes (FICN) at the time of their arrest. Terrorists who were arrested in Delhi confirmed that the Kashmir-based militant groups had been running FICN operations with Pakistan's Intelligence Agency (ISI) which runs the entire supply chain of FICNs and gave the names of other persons involved in these operations. They further confessed that they have been moving FICN to fund terrorism in India through their contacts. The Indian Mujahideen (IM) also raises funds through hawala transactions and circulation of FICNs in the country. IM's India operations chief Yasin Bhatkal was arrested by the STF in Kolkata in 2009 for carrying fake Indian currency notes.

A detailed forensic analysis by the NIA has revealed that the notes have been printed on highly sophisticated machines involving huge capital investment and the paper used to print the counterfeit notes matches with the legal tender of Pakistan. The parliamentary panel was informed that the volume of FICN smuggled into India in 2010 was between Rs 1,500 and Rs 1,700 crore, which went up to Rs 2,500 crore in 2012. Over the last 6 to 8 years, the volumes would have increased many fold and indications are that though the checks have been intensified at the traditional routes, the flow of counterfeit currency has not slowed down.

Investigations into past terrorist activities and confessions made by terrorists apprehended during such operations have confirmed the fact that State and non-state actors in Pakistan are solely responsible for printing and smuggling FICN through various channels to foment terrorism and criminal activities in India.

Further, it was revealed that large-scale funding for Kashmir-centric Hizbul Mujahideen comes from FICN cartels based in Pakistan. The Unlawful Activities, Act, (Prevention) 1967, as amended in 2012, has come into force from February 01, 2013 which undoubtedly broadens the definition of the 'terrorist act' by incorporating threats to the economic security and the monetary stability of India by way of production, smuggling or circulating of high quality counterfeit fake currency. The law increases the period of declaration of an association as unlawful from two years to five years, criminalises high quality counterfeiting and includes within its scope offences by companies, societies or trusts and provides punishment.

Fake Indian currency seized by security and intelligence agencies has increased each year since 2017. Data available indicates that there was a 190% jump in 2020, compared to the previous year. Seizures continue to remain a concern for 2021.

Fake Rs 2,000 notes constituted a large part of the seizures made by the state police forces, the National Investigation Agency and the Directorate of Revenue Intelligence. The forensic analysis of fake 2000 notes revealed that features such as the transparent area, watermark, Ashoka Pillar emblem, '2000' printed on the left, and the guarantee clause with the RBI Governor's signature were replicated. However, in many cases, the quality of FICN was found to be low, printed with help of printers and scanners."

In spite of the provisions of UAPA, as amended in 2012, the inflow of FICN has not reduced and would be a matter of concern for all investigating agencies.

(Writer is a former DG, DRI, and former Member, CBIC)