The war on terror's money
India's six-month investigation offers lessons on fighting underground banking.
SRINAGAR, INDIAN KASHMIR
To friends, Imtiaz Bazaz was a publisher of tourist magazines, a part-time private detective, and a supporter of Kashmir's 13-year struggle for self-determination.
But to Indian police, Mr. Bazaz was a bagman for terrorist groups. According to a six-month investigation that led to his arrest in May, Bazaz was the key link in a money trail between British charity groups, Kashmiri politicians, and members of violent Kashmiri terrorist groups. The case illustrates what it takes to keep funds out of the hands of terrorist groups from homegrown varieties like Kashmir's Hizbul Mujahideen to the more international Al Qaeda. Chasing a money trail may not be as exciting as ferreting into Afghan caves, but police say it could be the crucial step in preventing terrorist groups from carrying out another large-scale attack.
"It's a total war," says A.K. Suri, director general of police in Jammu and Kashmir. "You have to ensure that you bring about a financial squeeze in order to be sure the supply of weapons is stopped."
It's not an easy task, especially since today's terrorist groups don't require a lot of money to do their work. The combined assets of the 19 hijackers in the Sept. 11 attacks, for example, was about $300,000.
For America and its allies in the war on terror, the cornerstone of the underground banking system is an age-old business called hawala. Based entirely on trust, hawala dates back centuries to the Silk Road caravans, when traders were reluctant to transport massive amounts of cash through lands filled with nomadic raiders. Instead they carried letters of credit from a merchant in one city and received cash from a separate merchant at the next destination. Accounts were settled later, when another trader passed through in the opposite direction.
Today's hawala dealers conclude their deals by e-mail and faxes instead of letters of credit, providing perhaps the world's closest example of what Bill Gates called friction-free commerce. Faster than an ATM, hawala has no paper trail and shields customers from tax authorities or intelligence agents.
While President Bush has launched a flurry of US initiatives from freezing assets of accused terrorist groups to setting up a Financial Action Task Force to combat money laundering experts say there have been few victories.
Even with substantial antiterrorist legislation to regulate financial transfers, hawala is still legal in the US. As a result, many local police don't know what it is, or don't consider it worth investigating.
"Prior to Sept. 11, nobody in the West took hawala seriously," says Harjit Sandhu, a former Indian policeman and now a financial crimes and terrorism expert on the panel of advisers to the United Nations Security Council. "After Sept. 11, things are changing, but then again, after every major terrorist attack the bureaucracies all talk of lessons learned, and after a few days, everything goes back to square one."
In India, on the other hand, hawala is a major violation of foreign-exchange laws, punishable by decades in prison. It's also extremely pervasive, police sources say even rich businessmen and powerful politicians use it for taking bribes or shielding their assets from taxation.
"In India, it's been used to pay for insurgency in Kashmir, and Al Qaeda has used it in order to send money to those jokers in Pakistan," says Jyoti Trehan, inspector general for the Punjab Armed Police and India's top expert on underground banking. "It's certainly not in the interest of my country to encourage hawala.... But for politicians and criminals, it's a handy tool."
In India alone, according to Interpol intelligence sources, the size of the hawala could be nearly 40 percent of India's gross domestic product. In 1998, the latest figures available, the amount of money in India's hawala system was estimated at $680 billion, roughly the size of Canada's entire economy.
Here in Kashmir, hawala dealers operate in Srinagar's main gold market, Lal Chowk. Indian police admit they are unable to stamp out hawala altogether, with even the burgeoning middle class using it to send money to their children in colleges abroad. Instead, police tend to monitor the major dealers for any transactions that may end up in terrorist hands.
Police say they discovered the proof against Bazaz in the home of top Kashmiri separatist politician, Syed Ali Shah Geelani, former chairman of a coalition of separatist parties called the All-Parties Hurriyat Conference and leader of the political party Jamaat-I-Islami. Police say they also found lists of "hundreds" of members of Hizbul Mujahideen, Kashmir's largest militant group.
To critics, Geelani's arrest in the early stages of state elections to be held this October was merely a way to harass a top politician advocating an election boycott. But for sources within the J&K Police, the arrests were a major breakthrough, based on some of the clearest evidence they've had dealing with such cases.
Police first targeted Bazaz, the go-between who began delivering money for British Kashmiri businessman Ayub Thuker, head of the World Kashmir Freedom Movement an umbrella organization of groups that work toward Kashmiri self-determination through "all peaceful, moral, and political means."
According to the J&K Police, Bazaz received nearly $300,000 between March 2000 and May 2002. Police say Bazaz sent this money to Geelani and another Kashmiri separatist leader, Aasiya Andrabi, leader of the women's Islamist party Dukhtran-e-Millat.
According to police, the transactions were seamless: Bazaz would receive a phone call from Mr. Thuker, and days later, the money would be delivered directly to Bazaz's hotel room in Old Delhi. Like a spy changing vehicles to avoid being tailed, Bazaz would deposit the money in one bank account as funding for his magazine ventures. He would then write a check, depositing the amount into a second bank, and then a third. Finally he would transfer it to a bank in Kashmir, where he would withdraw and deliver the amount in person. To prove that these transactions were illegal, police say they need to show a direct link to terrorist groups.
On June 9, police say they received such proof while raiding Geelani's home. There, they reported finding nearly 1,200,000 Indian rupees and $10,000. But the plum discovery, police sources say, were lists of "hundreds" of "known terrorists" from Hizbul Mujahideen.
"It's a strong case, built on evidence from the raids and confessions from Imtiaz Bazaz," says inspector general Suri. Despite his confidence, Suri declines to show evidence proving that Geelani has sent money to these "terrorists." Geelani has long said that his party has collected money to help orphans and widows of Kashmiri activists.
O.P. Sharma remembers the day, in 1991, when he caught a major hawala dealer in the act of funding terrorism. And he remembers finding evidence that the same dealer was also funding top names in Indian politics.
It was the proudest day of his 30-year career, and the day he began to lose faith in the Indian criminal-justice system.
Soon after accounting books were discovered in the home of R.K. Jain, a top hawala dealer in New Delhi, Mr. Sharma says police were told to ignore the evidence against politicians and to simply go after the terrorists. When he refused, Sharma promptly lost his job. A few months later, charges against all but two of the politicians in the Jain case including current Foreign Minister Yashwant Sinha and Deputy Prime Minister L.K. Advani were dropped.
Such political interference could have the dangerous potential, experts say, of undermining cooperation between US and Indian police forces tracking down Al Qaeda funds in Indian banking channels.
"In 30 years, all the investigations and prosecutions by me have ended in conviction. But in the biggest case of all, I got taken out," says Sharma, who has since retired.
Today, the Jain case is being rekindled, in large part due to investigative journalist Vineet Narain. In 1994, Mr. Narain filed a lawsuit in the Supreme Court, releasing the names of the politicians implicated in the Jain cases. Even then, political interference continued. One justice complained that he was being "pressurized" to set the Jain case aside once more. Another justice admitted having socialized with one of the dealers, but refused to recuse himself from the case.