How fake currency funds terror

Investigations into the Mumbai attacks have revealed that a large part of the money to fund the terror operation were obtained through fake currency rackets and hawala channels.

Intelligence Bureau sleuths say the menace of fake currency is on the rise and there is a specific information that this money is being used extensively for terror operations.

IB sources told this correspondent earlier that Pakistan's Inter Services Intelligence raises Rs 1,800 crore (Rs 18 billion) annually to fund terror operations and that a major chunk of this amount comes in through fake currency rackets.

IB officials say Rs 30 lakh (Rs 3 million) of the Rs 50 lakh (Rs 5 million) spent on the attack on the Indian Institute of Science, Bangalore, in December 2005 was obtained through the fake currency racket.

Investigating agencies claim that the amount of fake currency in India is a shocking Rs 170,000 crore (Rs 17 trillion).

Reserve Bank of India [Get Quote] officials dispute this figure and say that as on July 2008, the total currency available with the Indian public was Rs 603,000 crore (Rs 63 trillion) and if what the IB is saying is true, then it would mean that 28 per cent of the currency in the country is fake.

The fact that fake currency is being generated with the ISI's blessings in Pakistan is no secret. IB dossiers suggest that the notes are printed in Pakistan and then transferred to Dubai. In Dubai, the money is collected by hawala operators and dumped in India.

All fake currency reaches Maharashtra first, according to investigators. This is because it is familiar terrain for fugitive gangster Dawood Ibrahim. His proximity with the ISI grew after he took over responsibility of pumping fake currency into India.

IB officials say while Dawood controls most of this racket, Aftab Bhakti, originally from Mumbai, and Babu Gaithan, from Hyderabad, take care of operations in Dubai. The duo are in charge of collecting the money and then transporting it to India. This money is transported through individuals travelling between Dubai and India.

Labourers, who go to Dubai in search of employment, are the usual targets. When they return to India to visit relatives, they are lured with incentives to carry the fake currency. The notes are covered in carbon paper and stashed in suitcases and covered with perfume, clothes and other goodies. IB sleuths say there have been instances where notes have been packed in photographic albums.

While a large chunk of the fake currency is sent from Dubai, a sizeable amount of money also comes in through India's borders with Bangladesh and Pakistan.

Majid Bilal, Harkat-ul-Jihad-al Islami terrorist Shahid Bilal's brother, during his interrogation, said that Pakistani agencies had made it compulsory for terrorists to carry fake currency into India each time they crossed the border. He said the point men were based in Uttar Pradesh, Rajasthan, Andhra Pradesh and Maharashtra. The fake money is exchanged for original notes on a 2:1 basis. The money generated is then passed onto various terror networks in India to fund operations.

Majid mentioned that Rs 5 crore (Rs 50 million) was spent on last year's Hyderabad blasts and all this money was generated through the distribution of fake currency.

Both RBI and IB sources say it is difficult to differentiate between real and fake currency notes.

But an RBI official says there are prominent differences between the real and fake notes.

In a fake note, the security thread or the silver bromide and the logo are hazy. The three watermarks on each note -- the Ashoka Pillar, Mahatma Gandhi's image, denomination and the words RBI -- are not as prominent compared to original notes. In the fake currency, the sprinkled blue dots are not visible when seen through ultra violet light. Lastly, the superimposed digits are not visible when seen horizontally.

RBI officials, who have closely observed fake notes printed in Pakistan, say:

• The distinctive numbers are smaller in size.
• The alignment of series prefix are not in line when carefully examined.
• Thick lettering is used to print the issuing authority's name.
• Continuity of the security thread is not maintained.
• Alignment of the register on the left hand side of the watermark is not proper.
• Watermark on the left hand side bears a thicker image of Mahatma Gandhi whose eyes and spectacles are thicker in size.
• Intaglio printing is absent.
• Optical fibre marks are present when exposed to ultra violet light, but these are few when compared to genuine notes.
• The security thread does not glow under ultra violet light.
• The paper used is made of wood pulp while compared to the security paper, cotton and special ink used in the manufacture of the notes by the RBI.

There is a growing concern that more and more fake notes make their way into the Indian banking system. A bank official, speaking on condition of anonymity, explained that there are two ways in which such fake currency reaches banks.

Business establishments are targetted by the counterfeiters and the fake notes passed on to such entities in the course of business. The unsuspecting establishments innocently deposit the fake notes in the bank.

In some cases the perpetrators of the racket themselves deposit the fake cash, usually during peak hours and during busy periods like the festive season. Bank tellers, who are under tremendous pressure at these times, accept the notes without authenticating them.

While the RBI says that banks ought to be more careful and should have a fool-proof screening process, bankers say it is extremely difficult to keep a tab on every currency note.

Although the fake currency racket is a huge threat to the Indian economy, the conviction rate is a mere 6 per cent across the country. Explains R G Sadashiv Reddy, a senior advocate, "Such cases are incomplete unless the person, who originally floated the note, is caught. Usually, the case comes to light only when the fake currency has changed hands several times and there is no point in convicting a man who was last in possession of the notes."

Another hindrance is the law relating to such cases. An amendment to the Criminal Procedure Code now seeks to resolve this problem. This amendment proposes for the inclusion of more scientific experts to give evidence in cases relating to fake currency notes, in addition to officers of the Indian Mint or India Security Press, Nashik. Section 292 of the Criminal Procedure Code is proposed to be amended to enlarge the list of offices whose expert opinion on counterfeit currency can be considered as evidence.

By January 2009, the RBI proposes to withdraw all currency notes printed from 1996 and 2000. The RBI says that counterfeit notes are largely in the 1996 and 2000 series and hence it would be best to withdraw this series and introduce a new series of currency notes. The RBI says the new series will have enhanced security features. RBI officials, while understandably refusing to divulge the features, say these notes would be hard to copy.

The Central Bureau of Investigation plans to develop a national data bank of fake currency notes to help identify its origins.

Hit Pakistan army where it hurts -- its funding

British Prime Minister Gordon Brown visited Islamabad and gave 6 million pounds (about Rs 433 million) to Pakistan's government as a reward for the attacks on Mumbai, carried out by trained Pakistani militants. Not that Gordon Brown meant to encourage terrorism. Quite the contrary. The funds were given to Pakistan for counter-terrorism support. But in the equation of action and consequence, the Pakistan army would be happy to cash in another six million pounds. Every bit helps. But it is time for Western governments to ask whether the strategy of doling out dollars and pounds for terror has delivered the goods.

Being the 'frontline State' in the war on terror has netted the Pakistan army over $10 billion (Rs 500,000 million) in military assistance from the United States. The frontline of terror runs through the state of Pakistan -- for its army it has proven to be rich vein of gold. Most of the military assistance from the US has helped the Pakistan army arm itself to the teeth against its 'enemy State' India and helped tighten its dominant economic and coercive control over Pakistani civil society. Fighting terror is such a profitable business for the Pakistan army that one wonders what they would do if they actually caught the terrorists.

Instead, the Inter Services Intelligence, another arm of the Pakistan army, is busy eliminating evidence to maintain a very implausible deniability. A journalist from the respected Pakistani newspaper Dawn interviewed captured Mumbai attacker Ajmal Kasab's parents before a pall of secrecy descended on the town of Faridkot in Pakistani Punjab. Subsequent journalists noted the carpeting of the area by the ISI. Enough fear and awe was generated for Faridkot residents that subsequent visitors found their lips were securely sealed.

The evidence of Kasab's testimony, including the very existence of his parents, needed to be swiftly removed before too many other nosey journalists came calling. When the army's perpetual fig leaf, the need of India to provide more 'evidence', has become so tattered, every fibre is worth saving. Kasab's parents may well have been made to disappear yet, according to news reports, Hafiz Saeed, leader of the banned Jamat-ul-Dawah, is plainly visible outside his house despite his official 'house arrest.'

The more things change, the more they remain the same in Pakistan. A nudge and a wink, a few months of decreased visibility, and the terror apparatus will be back in business. The tactic of the carrot has not worked. Billions of dollars of US military aid has not led to a Pakistan that is any less an epicentre of terror than it was ten years ago.

Like a reliable cash machine, Gordon Brown went to Pakistan and coughed up some more money for terror. One wonders, what is the incentive for the Pakistan Army to change -- what it has done so far is clearly working well to keep it well-fed and well-polished.

Just as a thought experiment -- what if Gordon Brown had gone to announce that the International Monetary Fund is putting a stringent cap on defence spending in Pakistan? What if every terror attack having a link with Pakistan, caused the army's budget to be slashed and compensation handed to the attacked country? One suspects that the pro-active willingness of the army to take care of terror emanating from its soil would be greatly increased. After all, this is an institution that has shown it can protect its own interests fairly well.

The cost of terror must be raised. Not for ordinary Pakistani citizens. Not for its largely impotent civilian government that has become a diplomatic attache of the army. Not even for the terror camps and its brainwashed participants that emerge from and merge back into the Pakistani landscape. Wispy ghosts, these appear and disappear at the whims of the powers that be. But the cost must be raised for the Pakistan army, the singular institution that is responsible for the creation of the terror infrastructure and must be held responsible for its dismantling.

And there is no better way to raise this cost than to hit the army exactly where it actually bleeds -- from its pocket books. What the Pakistan army lacks is not resources but will. It needs a clarifying message that the support of terror will directly hit its interests rather than those of the over-burdened citizens of Pakistan or the forbearing citizens of India. Who will call the Pakistan army's bluff and free the citizens of Pakistan, along with the rest of the world, from its yoke? If Gordon Brown is not up for it, will Barack Obama show some spine?