How Are Pak Terrorists Moving Money? Hints From An FATF Report
FATF Has To Do Its Job
For those not in the know, the FATF is an intergovernmental body formed in 1987 by the G-7 countries, the European Commission and eight others (who are curiously not listed), to combat money-laundering, including "terrorist financing and the financing of proliferation of weapons of mass destruction".
This has nothing to do with morality, but with the fact that terrorist financing can include all manner of crimes, including human and narcotics trafficking, among other things; it can essentially infect the international banking system to the detriment of each state.
The FATF does periodic reviews of each country. India joined in 2010, and in 2024, it got an 'outstanding' report for its financial stability and probity. The body, however, warned it against the use of 'non-profit' associations for terrorist financing. A number of NGOs were shut down, causing a hue and cry of 'illiberalism'.
Pakistan, on the other hand, has been put on the 'grey list' several times, which means its financial systems have significant deficiencies. It was on the list in 2008, then in 2012, and then again in 2018 till 2022, during which period Islamabad sentenced Lashkar-e-Taiba (LeT) leader Zaki ur Rehman Lakhvi for five years Hafiz Saeed to 33 years in prison. The country also set in place the Anti-Terrorism Act (Amendment) Bill, 2020, which brought Pakistan's legal definition of terrorism up to international standards and aligned its laws with global norms on terrorist financing.
However, Pakistan's clean-up is far from done. It has just gone deeper underground.
Digital Routes
This is, however, not just about Pakistan and its backing of jihadist groups. Sure, in a move that would have Rawalpindi in panic, the report names and shames the LeT and the Jaish-e-Mohammad (JeM), as well as their so-called charitable arms. But it digs deep into the world of terrorist finance and warns that these actors have developed a 'persistent ability' to exploit the financial system of a majority of countries reviewed. The extent of the sophistication is apparent in the use of digital platforms like social media messaging apps and crowdfunding sites. Then there are shell companies, legal companies, and even trusts.
But here's the clincher. Terrorist financing is most effective when they control territory or are proximate to terrorist areas. That means taxes, diversion of humanitarian aid and access to natural resources.
The Thing About State Sponsorship
The key point in the document is that it flags, for the first time, state-sponsored terrorism, though it admits it has not yet developed a typology for this. It refers to reports of states helping designated terrorist groups to circumvent sanctions regimes, and interestingly notes, "When an organisation is not designated at the multilateral level, it is more likely to engage in financial activities, including fundraising".
That's one in the jaw for those analysts who wonder why we bother to get designations at the United Nations, a body largely seen as toothless. Sanctions are powerful instruments, if imposed strongly. True, Pakistan is not explicitly named, but the very recognition of this issue is vital for Indian investigators and diplomats. The report notes significantly that donations are coordinated through encrypted mobile communications, money services businesses, cash, or in virtual assets. In short, they "demonstrated remarkable adaptability" to beat the system. In addition, there is "an enhanced focus on technology and communications, with increased investment in secure communications devices, software, and cybersecurity measures". Now think about that in terms of Pahalgam, where the communications gear - the so-called 'ultra-sets' - operated only on radio waves. No wonder a trail was difficult to find.
Moving The Money
There's another frightening observation. Networked organisations such as the Islamic State and al Qaeda rely on regional entities for moving funds. That includes the AQIS (al Qaeda in the Indian subcontinent), which, just after India's Operation Sindoor, called upon all Muslims in India to launch a jihad. That's strange in itself, since the group was last heard of operating out of Assam in 2022 in conjunction with Bangladeshi groups. That's networking across three international borders.
Then there are the Islamic State's 'offices' such as the Maktab al Siddiq, which move funds through India and Bangladesh, among others, in hawala transactions. No, hawaladars are no longer handling greasy notes. Many, including in Afghanistan, are using cryptocurrency. The hawala trail itself has been replicated into a blockchain-based pseudo-anonymous transfer system, where a new user has to be vetted before they fit into the system, making it virtually impossible for an investigator to penetrate it. It's like a vast spider's web.
Techno Parks for Terror
Apart from all of the above, some unusual features have been identified. Terrorists now also bank on monetisation of social media platforms like Zoom or YouTube. There's also 'X', which provides services for its 'blue tick', and which, in turn, allows users to 'tip' other accounts using various payment methods. Research has found blue-ticked accounts tied to sanctioned entities and individuals.
Then there's YouTube's 'Super chat' feature, which allows viewers to purchase highlighted messages in live streams. Easy to support your favourite jihadi even while increasing their visibility. There are prepaid cards, pre-loaded, allowing easy transfer, and 'open loop' cards, which means money can be drawn across the world. It's enough to make an investigator cry into his coffee.
Following The Trail
However, investigators in Pakistan are particularly astute. One example cited in the FATF report is the evidence from a car bomb attack that was claimed by the Tehrik-e-Taliban Pakistan (TTP). The investigation involved tracing the owner of the car. which led to the authorities finding out that the person reactivated a dormant bank account, conducted some three transactions for large amounts, and then closed it entirely. Pakistan's Financial Monitoring Unit identified foreign remittances as well, and eventually arrested the lot. The point is, Pakistan can do a good job when it wants to.
But in the Pulwama attack of 2019, it didn't despite being given a chance. The report notes flatly how the investigations back then "revealed the cross-border movement of a large quantity of explosives into India". Notably, a key component of the improvised explosive device used in the attack - aluminium powder - was procured through Amazon. So, e-commerce sites are another area that could be misused. That's damning enough, though the FATF also notes how the authorities concluded' that the attack was by the JeM.
Today's Terrorism Is Complicated
Everything considered, this is a report that portrays the extent of the challenge security agencies face in preventing terrorism in the first place, and, in the second, grappling with the ensuing 'whodunnit'. It's virtually impossible to trace everything, and terrorist sponsors know it.
The immediate danger for New Delhi is the fact outlined clearly by the FATF: that the individual terrorist, inspired by a deluge of online propaganda, needs very little money to go ahead and hit its target. The Gokarnath temple attacker was arrested after some 44 international third-party transactions were found through forensic analysis of his phone. Today's terrorists have gone far beyond that.
Ultimately, the burden of finding proof has become an even bigger task, as also convincing some world leaders who often offer to 'mediate'. In the end, there is only one solution: the terrorist sponsor has to be shut down in its entirety. Forget the web, just smash the spider.
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