Time to discipline India through FATF

India is awash in terror financing

By: Iraj Abid

According to the United Nations Office on Drugs and Crime (UNODC), money laundering in India reached $159 billion in 2021, accounting for around five percent of its GDP. Based on the UNODC estimates, the Federation of Indian Chambers of Commerce and Industry released a report last September, titled “Hidden Streams: Linkages between Illicit Markets, Financial Flows, Organized Crime and Terrorism.” According to the report, between 2009 and 2018, there was a $674.9 billion surge in trade-based money laundering in India. Currently, India’s illicit trade gap is estimated to be 20 percent. Overall, India’s black economy is projected to be about 62 percent of its GDP.

According to the Global Organized Crime Index (2021), criminal networks enjoy significant influence in India, scoring 6, which is higher than the average of 5 among 122 countries. The illegal economy has an overall score of 6.3, surpassing the average of 5. India’s illicit arms trafficking mark stands at 5.5, exceeding the 5.2 global average. In drugs, India has a count of 6, compared to the global average of 5. The FICCI report further reveals the complex nexus between illicit trade, organized crime and terrorism in India. It highlights that illicit markets are on the rise and are contributing to the increase in criminal activities and terrorism in India, and beyond.

Under the Modi-led Bharatiya Janata Party government, India has devised a two-pronged strategy for engaging with international organizations. Firstly, it uses multilateral platforms to spread propaganda against other states, advocating for imposition of sanctions for violation of rules. Secondly, the same rules are exploited to bolster the BJP’s hold domestically. Indian association with the Financial Action Task Force (FATF) serves as a textbook example of this strategy.

According to the Amnesty International report titled “Weaponising Counterterrorism: India’s Exploitation of Terrorism Financing Assessments to Target Civil Society,” the Indian authorities have exploited the 2010 and 2013 FATF recommendations to introduce draconian laws such as the Foreign Contribution (Regulation) Act (FCRA), Unlawful Activities (Prevention) Act (UAPA) and Prevention of Money Laundering Act (PMLA). These laws are used to suppress dissent, stifle activism and restrict funding access for non-governmental organizations (NGOs).

The Amnesty International report points out that in India over 20,600 NGOs have had their licences cancelled in the last decade, including 6,000 in 2022. This crackdown has forced NGOs to significantly reduce their staff or shut down entirely. As a result, vital programmes supporting human rights, minority advocacy, gender equality and environmental issues are being curtailed, leaving the vulnerable population without crucial support. Ironically, NGOs are being targeted without any risk assessment, defying FATF’s own standards to uphold transparency in the process. Amnesty International ceased operations in India in 2020 because of “constant harassment” from the government. The UAPA, India’s major counterterrorism law, is often used to arbitrarily detain human rights activists and even students.

The rights of minorities in India are already threatened under the shadowy “Hindutva” ideology. The BJP, which is the political face of the Rashtriya Swayamsevak Sangh (RSS), aims to create a “Hindu Rashtra” exclusively for the followers of the Hindu religion, leaving no place for religious diversity. Indian minorities, particularly Muslims, routinely face persecution at the hands of the Hindu majority, often becoming targets for Hindu extremists due to their religious identity. Incidents of Hindu mobs desecrating mosques and churches are on the rise. Dalits, who constitute about 17 percent of the population, endure the worst forms of abuse. Given this background, the Modi government has launched a campaign targeting anyone calling out the appalling state of human rights in India.

The ongoing ethno-religious conflict in Manipur between the Hindu Meitei majority and the Christian Kuki tribal community has also laid bare the fraught social fabric of Indian society. According to official sources, violent clashes have claimed at least 180 lives with several hundred injured. Churches and villages were set ablaze and more than 60,000 people have been displaced and forced to live in relief camps. Kuki women have been subjected to horrifying gender-based violence by the Hindu mobs. A number of United Nations human rights experts have raised alarm on the grave humanitarian situation in Manipur and an “inadequate humanitarian response” by the Indian government. According to some experts, there are reports of counterterrorism measures being exploited in Manipur to “legitimize acts of violence and repression against ethnic and religious minorities.”

Meenakshi Ganguly, South Asia director at Human Rights Watch, notes that “the BJP’s embrace of the Hindu majority at the expense of minorities has seeped into government institutions, undermining equal protection of the law without discrimination …the government has not only failed to protect Muslims and other minorities from attacks but is providing political patronage and cover for bigotry.”

The FATF must hold its member states accountable to prevent exploitation of the global watchdog’s recommendations. FATF also needs to take necessary measures to discipline India through its mechanisms for indulging in terror financing and money laundering.

Throughout India, Hindutva groups are involved in ethnically or racially motivated terrorism and enjoy state patronage. Hindutva Watch, an independent research group documenting hate crimes and hate speeches against religious minorities in India, found out that 80 percent of hate incidents occurred in states and union territories under the BJP rule. The RSS affiliates like the Vishwa Hindu Parishad (VHP) and the Bajrang Dal were mentioned as religious militant organizations by the World Factbook of the Central Intelligence Agency in 2018.

A critical aspect of the support infrastructure for the Hindutva groups in India lies in an ingenious network of financial transactions, often masked as charitable endeavours through both domestic and international organizations. Hindutva Watch emphasizes that the growth and influence of these groups are tied to their financial resources. A report by the South Asian Citizens Web (SACW) sheds light on the flow of millions of dollars from charity groups in the USA to RSS-affiliated organizations in India. Between 2001 and 2014, significant contributions were made by organizations such as Ekal Vidyalaya Foundation and Vishwa Hindu Parishad of America (VHPA), which provided $27 million and $3.9 million, respectively, to the RSS and its affiliates. Additionally, Sewa International transferred $3.3 million to various right-wing activities across India, while the Infinity Foundation channeLled $1.9 million in grants to universities and researchers supporting the Hindu supremacist agenda. This international funding acts as the financial backbone of Hindutva groups.

In fact, the Indian terror tentacles have outgrown their geographical borders, where Indian diplomatic presence is leveraged to perpetrate terrorism in other countries including NATO member states. From espionage activities in the Middle East to financing terrorist outfits like the Tehreek Taliban Pakistan and the Balochistan Liberation Army against Pakistan, India is now engaged in an assassination drive in the Western countries, targeting Sikh nationalists. India has thus started behaving like a rogue state. Ironically, despite its dubious history of supporting terrorism, New Delhi has manipulated its FATF membership in its favour and against other states.

Despite showing overzealousness in implementing FATF recommendations, the Indian government has failed to control money laundering and illicit trade. The Smuggling in India Report (2021-22) highlighted 437 cases of duty evasion amounting to Rs 39,240 million, marking a 40-percent surge from the Rs 28,100 million reported in the previous fiscal year. The UN-backed International Narcotics Control Board (2023) identified India as a significant contributor to the over $650 billion global drug trade, functioning as a distribution hub for narcotics markets worldwide.

According to a report titled “A Golden Web: How India Became One of the World’s Largest Gold Smuggling Hubs (2019),” “various policies in India have incentivized smuggling and the illicit trade of gold.” The report revealed that “possible conflict and illicit gold tied to human rights abuses in Africa and South America is entering India.” According to the same report, “illicit gold enters the country, is absorbed into the legal market with ease and is re-exported back out as jewellery.”

Aakar Patel, Chair of the Board at Amnesty International India, has urged FATF to hold Indian authorities accountable for the weaponisation of FATF recommendations, stating that Indian actions have led to a failure in compliance with both FATF standards and international human rights law.

The FATF must hold its member states accountable to prevent exploitation of the global watchdog’s recommendations. FATF also needs to take necessary measures to discipline India through its mechanisms for indulging in terror financing and money laundering.

The writer is a freelance columnist

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