Money Talks

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As a pre-emptive strategy to avoid condemnation by the Financial Action Task Force (FATF) due to meet next month, the State Bank has updated its rules for banks to ensure that they’re more thorough in handling funds that could be traced back to persons or groups designated by the UN as terrorists.

The intergovernmental organization, consisting of 35 nations, was initially formed to combat money laundering, but expanded its domain in the wake of the 9/11 attacks, where it took on the role of fighting the menace of terror financing. Pakistan’s anxieties of being on the hit list of the organization is mainly because it could impair the country’s ability to borrow money if its banking system is classified as a money laundering sanctuary.

While Pakistan was exempted from the organization’s scrutiny in 2015, after it lauded its efforts towards combating terror financing, the revival of banned outfits like the Lashkar-i-Taiba under new names, and the comfortable existence of groups like the Jaish-i-Mohammed openly running seminaries and fundraising, has birthed concerns regarding Pakistan’s state of affairs in the organization.

The intricacies of terror financing are multifaceted, nurtured through the presence of loopholes in the system. In Pakistan, the existence of a thriving black economy, one towering above the formal economy, continues to lend monetary support to the nefarious activities of organized crime syndicates. To shut this can of worms for good, it is imperative to understand the complexities of the phenomenon, the challenges the state faces in putting a noose around it, and how it can be rectified.

On the blink

Pakistan’s state machinery is one that keeps blinking the red light, but nobody seems to tend to it. Instead, solutions are limited to on the surface cosmetic changes, where the root cause of a problem is ignored, and allowed to flourish as a result.

According to analysts, Pakistan’s inability to amputate the money supply of banned terrorist organizations is due to “political foot-dragging and sympathetic supporters” throughout the country. In a system where politicians rely on militant organizations to bring in votes due to the local support that they enjoy, politicians are hesitant to clamp down on them. It is for this reason that militant organizations operate freely in certain parts of the country, South Punjab being the most notorious example, under the nose of the state apparatus – carrying out its day-to-day activities of recruitment and fundraising without any impunity.

The government’s lack of commitment and jurisdictional battles within the bureaucracy over the issue also hindered the progress of the National Counter Terrorism Authority (NACTA) in its early days when it was formed. According to its director Ishan Ghani, NACTA is still in its “formative stage” due to a lack of focus on counterterrorism despite military and police operations against alleged militant hideouts.

The discrepancy between provinces, the dearth of updated systems, and the existence of outdated lists, makes it difficult to identify suspects with links to terrorism. Banning militant outfits may not be the solution to all problems terrorism, but it’s a good start – it will obstruct the ability of groups to work on a large scale, where their transactions would have to be done through ‘benami accounts’. While this won’t make it impossible for them to function due to the cushion the loopholes in the Pakistani system provides the informal economy with, it would hinder their operations for sure.

And that is the other challenge that authorities like NACTA face, the existence of a flourishing informal economy, with large amounts of informal activity that evades regulatory controls and tax measures. The lack of transparency in non-Western money transfer systems like ‘hundi’, makes it easier for criminals and terrorists to move around funds. And while frameworks like the International Convention for the Suppression of Terror Financing exist, the irregularities between nations enable terrorists to exploit this gap – even more so in nations with feeble anti-terror financing models.

Then there is the issue of charities, where an added dimension of technology has now augmented the fundraising capacity of extremist organizations, where modern day terrorists call upon ‘followers’ with a click, and upload videos and sermons to lure in sympathizers. An investigation carried out by Dawn revealed that 64 banned outfits are present on Facebook in the form of hundreds of groups, pages, and individual user profiles.

Moreover, fundraising through charities becomes child’s play in Muslim countries like Pakistan where the regulation of these charities through registration, monitoring, and background security checks, often slides through the cracks due to the religious significance attached to them.

According to Ghani, fundraising often goes into high gear during Ramazan. However, NACTA has circulated a list of acceptable charities this time around to ensure that these donations don’t fall in the hands of terrorist organizations and militant groups. However, the challenges surrounding individual donations from merchants and traders in urban and rural areas to sectarian and jihadi groups still remain, as it is difficult to document and identify due to cash transfers. However, NACTA is looking into the phenomenon, crafting a policy to regulate cash transfers. But according to Ghani this will require “anyone transferring Rs 1 million or more to identify the origins of the money”, ruling out the incidence of money transfers in small amounts.

To combat the menace of terror financing, it is crucial to be conscious of fundraising, transfers, and how they are utilized. Considering the discrepancy between the provinces, any initiatives would prove to be sterile in quelling the cancerous pathogens of terror financing. Information sharing between provinces, as well as joint investigations led by intelligence and law-enforcement agencies need to be carried out to identify the sources of financing and strike at the roots.

The enormity of the challenge lies in the ever-evolving nature and capabilities of the enemies – to find avenues to further their cause once one door shuts; it also lies in the slow response of the Pakistani government to the brisk pace of ways and means anti-state actors acquire, and the internal irregularities and contradictions that lie in the identity of the Pakistani state where everyone’s idea of where the nation should be headed differs. Terror financing, finally, is being addressed in Pakistan – slowly, and hopefully surely. It is also time we confront the first cause of terrorism along with it: our mindset.

TACSTRAT ANALYSIS

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