‘400% rise in terror-related financial transactions in 2010’

Terror struck the country twice in 2010 — Pune German bakery blast in February and Varanasi blast in December — and security agencies claimed that terror activities were minimal.

But a recent financial intelligence unit (FIU) report to the Union finance ministry has exposed how hollow the claims were and the ominous extent of terror activities in the country. The FIU received at least 362 terror-related suspicious transaction reports (STR) compared to 90 in 2009.

The FIU is a specialised government agency created to act as an interface between the financial sector and law enforcement agencies to identify suspicious money-laundering activities that require investigation.

Financial institutions saw at least 10,067 STRs (including the 362 terror-related) in 2010 compared to 4,409 STRs in 2009. The FIU found an increasing trend of terror-related STRs originating from the eastern part of the country. The agency’s report highlights that all suspect accounts are connected through a common permanent account number, address and contact numbers.

“The volume of transactions in these accounts is large and deposits are made daily,” reads the report. Also, what is worrying is, in most cases huge amounts of money are deposited in cash and withdrawn almost immediately through ATMs located elsewhere.

Once withdrawn, neither can the money be traced nor the account holder, a central intelligence officer said. The FIU had passed on the information to enforcement agencies for action. 

The report defines a suspicious transaction report as a transaction (cash or kind), regardless of its value, that might “involve the proceeds of a crime” or that appears to have been made “under unusual circumstances without any economic rationale or bonafide purpose” or that involves “financing of terror-related activities”. DNA has a copy of the report.

To prove its point on terror-related STRs, the report cites the example of an account in a western Uttar Pradesh bank. The account holder had declared himself as self-employed (trader) with an annual income of Rs3 lakh. When bank authorities noticed cash deposits made into the account from Jammu, Srinagar and Mahrajganj were immediately withdrawn from ATMs in Delhi and UP, they informed the FIU. Investigations showed the account holder owned a factory in Jammu with business dealings in Srinagar. Not only that, one of his relatives in UP had links with terrorists and had even served time in a Guwahati jail, the report read.

The report highlights how anti-money laundering software, used by financial institutions, resulted in more number of STRs being reported. The software helps in identifying suspicious transactions.

The prevention of money laundering act (PMLA) makes it mandatory for financial institutions to inform the FIU about suspicious transactions.