A recently released US State Department report has suggested that despite Prime Minister Narendra Modi’s announcement to de-monetize Rs 500 and 1,000 notes in November last year, the Indian authorities have failed to achieve one of its state objectives, to curb suspicious sources of funding terrorist activities.
In fact, the report, titled “Country Reports on Terrorism 2016”, complains, of late, US investigators have had “limited success in coordinating the seizure of illicit proceeds with Indian counterparts”, which was not the case in the past.
It emphasises ,“While, in the past, intelligence and investigative information supplied by US law enforcement authorities led to numerous seizures of terrorism-related funds, a lack of follow-through on investigative leads has prevented a more comprehensive approach.”
This state of affairs happened despite the fact that, says the report, “The US Department of the Treasury and India’s Ministry of Finance continued to combat money laundering and terrorist financing.”
The report regrets, “Although the Government of India aligned its domestic anti-money laundering/countering the financing of terrorism (AML/CFT) laws with international standards by enacting amendments to the Prevention of Money Laundering Act in 2012, and in 2016 initiated a National Risk Assessment for AML/CFT to assess the country’s terrorist financing risk, it has yet to implement the legislation effectively, especially with regard to criminal convictions.”
“Law enforcement agencies typically open criminal investigations reactively and seldom initiate proactive analysis and long‑term investigations”, the report underscores, adding, “While the Indian government has taken action against certain hawala financing activities, prosecutions have generally focused on non-financial businesses that conduct hawala transactions as a secondary activity.”
India's prosecutions have "generally focused on non-financial businesses that conduct hawala transactions as a secondary activity":US report
“Additionally”, the report underlines, “The government has not taken adequate steps to ensure all relevant industries are complying with AML/CFT regulations. The reporting of terrorism-related STRs has shown an increasing trend in recent years, with FIU-IND receiving 112,527 suspicious transaction reports (STRs) between July 2015 and May 2016.”
“The government regulates the money services business (MSB) sector, requiring the collection of data for wire transfers and the filing of STRs by non-profit organizations”, the report says, though noting, “While the Indian government supervised, regulated, and monitored these entities to prevent misuse and terrorist financing, a large unregulated and unlicensed MSB sector remained vulnerable to exploitation by illicit actors.”
“The degree of training and expertise in financial investigations involving transnational crime or terrorism-affiliated groups varied widely among the federal, state, and local levels and depended on the financial resources and individual policies of various jurisdictions”, the report says.
According to the report, “India made no major changes to its counterterrorism laws in 2016 and continued to address terrorism-related activities through existing statutes, including the Unlawful Activities Prevention Act (UAPA) (1967), the South Asian Association for Regional Cooperation Convention on Suppression of Terrorism Act (1993), and various state-level laws.”
Pointing towards where the UAPA could be misused, the report says, “The UAPA presumes the accused to be guilty if the prosecution can produce incriminating evidence indicating the possession of arms or explosives or the presence of fingerprints at a crime scene, regardless of whether criminal intent is demonstrated.”
It underlines, “State governments held persons without bail for extended periods before filing formal charges under the UAPA. Other state-level counterterrorism laws reduce evidentiary standards for certain charges and increase police powers to detain an accused and his or her associates without charges and without bail for extended periods, sometimes lasting several years.”