India major target for money launderers, terrorists: US report

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Arun Kumar | 04 Mar, 2011
India's economic and demographic expansion makes it both a regional financial centre and an increasingly significant target for money launderers and terrorist groups, according to a new US report.

"India also faces an increasing inflow of high-quality counterfeit currency, which is produced primarily in Pakistan but smuggled to India through multiple international routes," said the State Department's International Narcotics Control Strategy Report (INCSR) to US Congress.

"Criminal networks exchange counterfeit currency for genuine notes, which not only facilitates money laundering, but also represents a threat to the Indian economy," the report added.

India's extensive informal economy and remittance systems, porous borders, strategic location, persistent corruption, and historically onerous tax administration contribute to its vulnerability to financial and terrorist-related crimes, it said

India's location between heroin producing countries in the Golden Triangle and Golden Crescent, along with its porous borders, also makes it a frequent transit point for drug trafficking, said the report reviewing conditions in the major illicit drug-producing countries and major drug-transit countries.

India is also a significant target for terrorist groups, both external and domestic, the report said noting most terrorist activities are conducted by international terrorist groups and entities linked to the global jihad, with the support of both state and non-state external actors.

In addition, several domestic separatist and insurgent groups are active, it said. "Terrorist groups often use counterfeit currency and hawaladars, as well as physical cross-border currency smuggling, to move funds from external sources to finance their activities in India."

Taking note of India's low number of money laundering convictions and the financial sector's low number of terrorism-related suspicious transaction reports, the report said suggested tighter controls.

The INCSR also suggested that India has become a hub of drugs sold through illegal Internet pharmacies and the misuse of courier services, despite constant efforts by governments at all levels to combat this sort of crime.

However, it noted that India is increasing its efforts at training of its national enforcement officers, and is vigorously exploiting opportunities for international cooperation in an effort to improve the effectiveness of both its demand and supply control efforts.