The Financing of Lashkar-e-Taiba

By: Geoffrey Kambere, Puay Hock Goh, Pranav Kumar, Fulgence Msafir

Since its formation in 1990, Lashkar-e-Taiba (LeT) has evolved from a local threat focused against India to a global jihadist threat. While many experts have addressed the operational facets of LeT, its finances have not received commensurate attention. This article aims to redress that gap. It is divided into four major parts. The first part provides a brief history about LeT, including its ideology, organization, training, and operations. The second part focuses on LeT finances: its primary funding sources, methods of moving money, and trends in spending. The third part presents a brief case study of the 2008 Mumbai terror attacks; and in the fourth section, we examine the countermeasures initiated by various actors, weaknesses in the present response, recommendations, and conclusions.

Background

Origins

"In 1984, Zaki-ur Rehman Lakhvi organized a group of Ahl-e-Hadith Muslims from Pakistan to wage jihad against the Soviets in Afghanistan."[1] A year later, "Hafiz Saeed and Zafar Iqbal, two professors at Lahore University, formed the Jamat-ud-Dawa (JuD) as a missionary group dedicated to the tenets of Ahl-e-Hadith Islam. In 1986, Lakhvi merged his outfit with JuD to form the Markaz al-Dawa-wal-Irshad (MDI)."[2] Abdullah Azzam, Osama bin Laden's mentor and the father of modern, global jihad, was one of the cofounders of MDI. MDI enjoyed active support from both the Pakistani Intelligence Services (ISI) and the CIA for fighting alongside the mujahedeen.[3] After the Soviet withdrawal, Pakistan appropriated the assets created during the Afghan war to wage a proxy war against India in Jammu and Kashmir (J&K). In 1990 LeT was launched as a separate military wing of MDI.[4] Hence, LeT's commitment to global jihad, connections with Al Qaeda (AQ), and strong state support can be traced back to its very birth as an organization.

Violence erupted in J&K in 1989; however, the insurgency there started to wane in a few years. As a result, Pakistan brought in jihadi elements to resuscitate the Kashmir movement in the mid to late 1990s. It is estimated that the ISI spent over $50 million USD annually to support groups such as LeT, Hizb-ul-Mujahedeen, and Jaish-e-Mohammed (JeM). See Figure 1 below, which shows the peak of violence occurring after the slowdown in the early 1990s. Consequently, the conflict in J&K became less of a local insurgency and more of a campaign sponsored by Pakistan through its many proxies. The growing reputation of LeT as a jihadi force fighting to liberate Kashmir enhanced its ability to recruit and raise funds.[5]

Terrorist Fatalities
Figure 1. Overall Fatalities in J&K.[6]

Ideology

Jihad forms the cornerstone of LeT's ideology. In a publication titled "Why Are We Waging Jihad," LeT leaders exhort Muslims to liberate themselves from persecution by the infidels and identify India, the United States, and Israel as the mortal enemies of Islam.[7] LeT's motivation toward the Kashmiri cause is not just territorial but ideological; the group argued that once J&K was liberated, it would serve as a base to restore Islamic norms in the Indian subcontinent.[8] MDI and LeT also aim at transforming Pakistan's entire society toward their radical interpretation of Islam through dawa (proselytizing) and khidmat (social service).[9]

LeT recruits from Pakistani followers of the Ahl-e-Hadith movement, which is Salafist in orientation, and believes that Muslims must return to a "pure form" of Islam. Because the Ahl-e-Hadith movement pales in comparison to the strength of Deobandi organizations in Pakistan, however, and because LeT also alienates many mainstream adherents to the Ahl-e-Hadith movement because of its calls for jihad, the LeT has generally been almost entirely dependent upon the ISI and on Saudi benefactors for its funding.[10]

Organization

Hafiz Saeed, one of the founders of JuD, was the aamir (chief) of both MDI and LeT. The MDI is functionally organized into separate departments for dawa, finance, external affairs, propaganda, and khidmat, whereas the LeT has a quasi-military structure organized by various geographic regions in J&K. By 2000, MDI and LeT had at least 70 district offices in Pakistan and a plethora of smaller ones totaling more than 2,000.[11] The organization had its headquarters in Muridke, near Lahore Pakistan, in a sprawling compound that houses numerous community services.[12] Subsequent to the 9/11 terrorist attacks, LeT is reported to have moved its headquarters to Muzaffarabad in Pakistan Occupied Kashmir (POK).[13]

LeT is reported to have several thousand members, of which 750 cadres are said to be operating in Kashmir.[14] A sociological profile of 100 LeT cadres found their backgrounds were similar to those of low-ranking officers of the Pakistan Army hailing from Punjab and the North West Frontier Province (NWFP). Interestingly, the cadres were better educated compared to other terrorist groups in the region, as its leaders emphasize the need for education to be able to wage a modern jihad.[15]

The cadres are equipped with weapons ranging from small arms such as AK-47s to heavier weapons such as rocket-propelled grenades, and also force multipliers such as night-vision devices, global positioning systems (GPS), and satellite phones. LeT is known for its proficiency in employing improvised explosive devices in Kashmir and Afghanistan.[16]

LeT's training is divided into three parts: Daure-e-Aama (basic training), Daure-e-Suffa (religious training and proselytizing), and Daura-e-Khasa (specialized training for guerilla warfare). In addition to the three basic stages, selected cadres may receive special training for specific skills related to espionage, subversion, sabotage, and maritime operations.[17]

Operations

An overview of the operations conducted by LeT presents a vivid picture of how the terrorist organization has evolved from a local to a global threat. During the 1990s, most of LeT's operations were conducted in J&K, where the organization was known for targeting civilians, and fidayeen attacks (LeT's term for suicide attacks) against security forces. The December 2000 fidayeen attack against the Delhi Red Fort was one of the first terrorist attacks by LeT outside J&K.[18] In December 2001, Jaish-e-Mohammed (JeM) and LeT attacks on the Indian Parliament steered Pakistan and India to the verge of a conventional war. In response to international pressure, Pakistan's then-President Pervez Musharraf banned the MDI and LeT; however, the actions by the state remained cosmetic with no effect on LeT's capabilities or its financial resources in particular. The July 2006 bomb blasts against the Mumbai local rail network that killed more than 200 people was one of LeT's more recent acts displaying its intent.[19] Over the past decade, LeT has established sleeper cells in India and nurtures radical groups such as Indian Mujahedeen (IM) and Students Islamist Movement of India (SIMI).[20]

In the aftermath of the U.S. invasion of Afghanistan in 2001, LeT provided active assistance to AQ in the form of safe havens, training, and acting as a gateway for aspiring jihadis to reach AQ.[21] Abu Zubayda was one of the most notable AQ members captured from a LeT safe house at Faisalabad.[22] The LeT followed a creative policy to allow its cadres leaves of absence during which they could fight with AQ as freelancers, which allowed for plausible deniability. British forces in Iraq captured at least two LeT operatives in 2004 and handed them over to the Americans.[23] Subsequent to this capture, Musharraf came down heavily on LeT, though this incident did not fracture the group's alliance with the state. It is noteworthy that even at the height of violence within Pakistan, LeT did not turn against the state.[24]

LeT's active involvement in Afghanistan can be traced to mid-2005 in the Kunar and Nuristan provinces.[25] An attack in July 2008 on a U.S. outpost at Wanat and the Indian embassy in Kabul were credited to LeT.[26] LeT also acts as a magnet to Western jihadis for training, funding, and even operational planning.[27]A wide array of American, Canadian, British, French, and Australian Muslims (including converts) has been trained in LeT camps.[28] The Virginia Paintball Group from the United States, Omar Khayyam from Britain, and Willie Brigitte from France were all trained in LeT camps in Pakistan and were later involved in providing material and operational support to the organization for its global operations.[29]

LeT's role in global jihad is not limited to operations in Iraq, Afghanistan, or training would-be terrorists. It has been actively involved in various international terrorist attacks and is deeply enmeshed with global jihadi networks: LeT had varying degrees of involvement in the 2005 London train bombings, the failed plot by Richard Reid to blow up an airplane using a shoe bomb in 2002, and the thwarted attempt to detonate liquid bombs onboard a transatlantic aircraft in 2006.[30]

LeT Financing

This section covers LeT's sources of funds, means of transfer of finances, and how the group spends the funds. Sources of funds include state sponsorship, charities, and businesses. Money is transferred through banks, use of hawala, and by couriers. Finally, funds are utilized mainly for dawa (preaching), khidmat (provision of social services), and jihad (Islamic campaign against non-believers) through recruitment, training, and procurement of equipment and weapons.

State Sponsorship

Most observers claim that the LeT is a terrorist group supported by the Pakistani state. Ashley Tellis believes "it is important to end the farce of treating these entities as if they are truly free agents, acting on their own accord, un-tethered to the state organs from which they derive protection, succor, and support."[31]

Likewise, Bill Roggio, a managing editor of The Long War Journal, attests that "LeT receives support from Pakistan's military and its intelligence service."[32] In addition, Tankel, writing for the New American Foundation, asserts that Pakistani financial and organizational support to LeT increased significantly during the 1990s.[33] Furthermore, Abubakar Siddique argues that LeT was able to expand quickly and launch jihad in the contested area of Himalayan Kashmir in the 1990s because it had been encouraged by Pakistan's army to do so.[34] As a final example of state sponsorship, Jyoti Trehan claims that the ISI gives both genuine and counterfeit money directly to LeT.[35]

Despite evidence of Pakistan's support to militant groups including LeT, Pakistan denies the allegations. After 9/11, Musharraf was forced to act against indigenous-based militants in Kashmir; however, his actions were questionable because LeT and JeM continued to operate beyond the "Line of Control (LoC)" in the contentious Kashmir area. As reported:

Pakistan has refused to crack down on homegrown terror groups such as Jaish-e-Mohammed and Lashkar-e-Taiba, despite their covert and overt support for al-Qaeda, the Taliban, and other terror groups. Inside Pakistan's military and intelligence services, which are the real powers in Pakistan, groups like Jaish-e-Mohammed and Lashkar-e-Taiba are seen as "strategic" depth against India, and are used as instruments of foreign policy.[36]

However, Tankel claims that the Pakistan government's direct support to LeT via ISI started to diminish in 2002 following international pressure and the threat of war with India.[37]

Charities

LeT exploits JuD's social welfare organization with its more than 50,000 registered members to spread its influence and to raise funds.[38] Within Pakistan, donation boxes are placed in many JuD offices and shops spread out all over the country, and at public gatherings, where money is solicited for the continuation of LeT's ideology and to celebrate the martyrdom of fighters.[39]

For example, within Europe, Britain is a major center for fundraising for LeT because of its very large Pakistani immigrant population.[40] But some of the money raised for JuD charitable activities is used to finance LeT's operations; in fact, funding for the plot to use liquid bombs to detonate transatlantic aircraft in 2006 was funneled through the charities that raised funds in British mosques for earthquake victims in 2005.[41] Additionally, JuD officials often travel to Saudi Arabia seeking donations for new schools at highly inflated costs that in turn are directed to fund LeT militant operations.[42]

LeT also receives charitable aid directly, especially from donors in Saudi Arabia and other Gulf states. According to Jonathan Fighel, Saudi Arabia covertly supports and promotes the "Saudi-Wahabbi political and religious influence in the Sunni Muslim world"[43] through its worldwide network of charities. LeT is one beneficiary.[44] In Kuwait, the Revival of Islamic Society has also provided direct support to al-Qaeda and LeT.[45]

Businesses

LeT controls many legitimate businesses, including fish farms, a hospital, a market, agricultural tracts, mobile clinics, and ambulance services.[46] The "farmers and labor wing" at JuD is responsible for the collection of ushr, an Islamic land tax, which is compulsory for farmers who must contribute 10 percent of their total produce to charity for the provision of essential services, especially in areas where the government of Pakistan has failed to provide those social services.[47] Notably, the group collects hides of most of the animals slaughtered during the holy festivals of Eid al-Adha and sells them for a profit.[48] This practice has emerged as a big boost to the group's income as it is estimated that during each Eid festival at least 1.2 million animal hides are collected.[49]

Illegal Activities

LeT's illegal fundraising activities include false trade invoicing, counterfeiting, extortion, and involvement in the drug trade. With false trade invoicing, the LeT overcharges for its goods or services. For example, the group sometimes adds an extra "5 to 10 Pakistani rupees for the jihad to the bill especially when selling various Jihadi publications."[50] Conversely, under-invoicing occurs when Kashmiri carpet dealers reduce the value of their exports to Gulf countries, and the difference in the true value of the merchandise and the value shown on the invoice returns to India through the hawala channel.[51]

Counterfeiters have enabled LeT to raise money by integrating the genuine money being brought across the border into Kashmir with counterfeit money.[52] Extortion of money from the local population is also common with corrupt officials in the Jammu and Kashmir region.[53] There are limited reports of LeT direct involvement in drug trafficking. However, given LeT's geographic location, the group is almost certainly tempted to be involved in narcotics smuggling because of the huge profit potential, and because there are fewer restrictions than with money received through state sponsorship and donations.[54] Some sources say increasing trade in narcotics, in addition to state sponsorship, has enabled LeT to maintain its terrorism activities.[55] In 2002, there was a huge harvest of opium on the border between Afghanistan and Pakistan that was estimated to be 5,000 tons by international agencies.[56] This yield was refined into injectable heroin in laboratories and smuggled by ISI narcotic smugglers; the harvest's estimated worth of $2.5 billion USD is reportedly being used by Pakistan to support the Taliban and terrorism in J&K.[57]

Moving Money

LeT moves money through traditional banks, hawala, and cash couriers. Moving money through banks via the account number displayed on the group's website has proved to be the safest method for LeT. Money from over 400,000 Pakistanis living in Britain moves legally from British banks to Pakistani banks, particularly as funds raised for families in Pakistan or victims of catastrophic events, such as the devastating earthquake in 2005.[58] However, much of that legally transferred money may get funneled to terrorist organizations. Jayshree Bajoria notes that about $10 million USD was transferred to Pakistan in 2005, and more than half of that was channeled to LeT activities.[59] Also, Trehan, an inspector in the Indian police service, further notes that "Jammu and Kashmir banks have played a fairly dubious role in channeling terrorist funding in Jammu and Kashmir."[60] Harvard's Jessica Stern asserts that "LeT…has acquired so much capital that they are actually planning to open their own bank."[61]

Hawala is an informal way of transferring value and is also a substitute remittance scheme, which operates differently from the established and regulated procedures of banks and other financial institutions.[62] Investigations by India's intelligence agencies after the Mumbai attacks in November 2008 revealed that LeT used hawala operatives and businessmen to move money from Gulf countries to LeT cells.[63] The hawala network has proved to be effective and cheap. Hawala channels were not only used to finance the Mumbai 2008 attacks but also for the Bangalore bombings in July 2008 and other terrorist attacks which have exposed hawala operators from Bangladesh and Oman.[64] These incidents imply that hawala is commonly used by LeT, which presents a challenge for Indian counterterrorism measures. If well-built cross-border relations between the hawaladers do exist, then curbing financing for terrorism inside India will be more difficult.[65] Hawala is built on trust and strong relationships among dealers so that even if one is arrested, investigators rarely get the desired domino effect; in fact, most hawaladers in transnational networks in South Asia are related.[66]

Trehan reports that the Pakistani ISI sometimes directly hands cash to terrorists, whereby the terrorists themselves can carry huge sums of money across the border into the Kashmir region.[67] This mechanism is good for the terrorists and the ISI as there are no electronic records in case of future investigations. In addition, preachers from JuD move freely while promoting jihad, returning to their bases with money they have collected, becoming, in essence, cash couriers.[68] At higher levels, money is moved to Kashmir by air transport from Pakistan through Nepal and Bangladesh to India because there are no constraints on moving money from Nepal to India, and this kind of money finds its way into the hands of the terrorist organization.[69] Additionally, Animesh Roul claims that "LeT has managed to build alternate routes through the porous borders of Nepal and Bangladesh while establishing bases in the Gulf countries."[70]

How LeT Spends

LeT spends funds in three major ways: khidmat, dawa, and military operations. In the effort to gain popular support, LeT's social warfare department called Idarah Khidmat-e-Khalq (IKK) plays a vital role by providing social services to the local populace.[71] On October 8, 2005, LeT is reported to have been the first to come to the aid of three million earthquake victims in Kashmir and Pakistan's Northwest Frontier Province when the Pakistani government was slow in taking immediate action.[72]

The group has utilized a good amount of money in its efforts to influence society through preaching and social welfare programs (dawa).[73] This has been done through recruiting and the spreading of ideology in J&K, often using funds donated for its social services work. Almost half of the external aid sent by Pakistani expatriates in the United Kingdom for the earthquake victims was funneled to the growth of the LeT.[74] Furthermore, "during the last decade, LeT purchased real estate throughout the country to open new offices and had more than 1,500 offices operating full time across Pakistan by the middle of the decade."[75] LeT is said to be investing some of the money it has raised in its legitimate businesses and enterprises in Islamic institutions and dawa model schools in Lahore and Muridke. These schools, in turn, have been sources of revenue to the terrorist organization through tuition payments.[76]

A hefty amount of LeT's money goes to its military operations. These operations are mostly efforts aimed at India and the widening of the U. S. footprint in India.[77] U.S. intelligence reveals that "in 2009, LeT's annual military operations budget...totaled more than $5 million [USD] per year."[78]

As part of its operational requirements, LeT recruits "get a certain down payment on recruitment, a certain amount as monthly remuneration and a certain amount of incentives for big acts of terrorism and a certain amount as end of the tenure payment, which is roughly two years."[79] Furthermore, considering various estimations "on average Rs 3 lakhs is being spent on funding a Kashmiri terrorist and up to Rs 5 lakhs is being spent on funding a foreign terrorist."[80] It is estimated that the staggering amount of $33 million USD is being spent on incentives for operatives and for their leaders, who reportedly get a much higher rate of remuneration. In addition, the terrorist group occasionally pays the families of operatives who are killed and those who take part in martyrdom actions, which also helps win local support.[81]

LeT also supports other terrorist groups and individuals. It is reported that LeT financially supported JeM in its attack on India's parliament in December 2001.[82] Other groups that have received LeT support include Indian and Western jihadist organizations. A French prosecutor asserted that LeT's representative in Paris served as a "compass" and provided logistical and financial support for Richard Reid, who attempted to detonate explosives hidden in his shoes while on board a flight bound for the United States from France in December 2001. And notable terrorist attacks against India, including the Mumbai 2008 attack, have been financed and supported by LeT cells in the Gulf.[83]

2008 Mumbai Terror Attacks

The 2008 Mumbai terror attacks should put to rest any doubts about LeT's threat to the international community.[84] The presumed reasons for the attacks were to derail the peace process between India and Pakistan and act as a provocation to push the two neighbors toward war. It was expected that punitive action by the Indian Army would impel Pakistan to move its forces from the Afghanistan-Pakistan region to the border with India. This would have relieved the pressure on the insurgents in the Afghanistan-Pakistan region who were under attack from the Pakistani military.[85]

Operational Details

Surveillance in preparation for the attacks was carried out beginning in 2006, and the perpetrators of the attack were trained over 18 months at four different locations in Pakistan.[86] The 10 terrorists departed Karachi on a small boat, transferred to a larger vessel, and eventually hijacked an Indian merchant vessel to sail them to India. Each terrorist had one AK-47, 200 bullets, eight grenades, a cellular phone, and other supplies. The group left a satellite phone behind in the boat, thus providing crucial evidence against LeT and the ISI.[87] On arrival at Mumbai, the terrorists divided into groups of two men and attacked five main targets: two five-star hotels, a railway terminal, a café frequented by Westerners, and a Jewish community center. In all, 166 people were killed; the death toll included 30 non-Indians, including six Americans and six Jews.[88]

The operation was controlled in real time from Pakistan over cellular phones.[89] The phone numbers used by the terrorists were linked to an account registered with Callaphonex, a U.S. VOIP provider. Payments for the phone account were made in two installments of approximately $200 to $250 USD each, through Money Gram in Pakistan and Western Union in Italy. The e-mail account used to set up the service was traced to 10 different IP addresses in Pakistan, Chicago, Kuwait, and Moscow.[90]

Nine terrorists were killed, and one, Ajmal Kasab, was captured alive. Confessions extracted from this lone captive confirmed that all 10 terrorists were Pakistani LeT cadres. The evidence also pointed toward intimate ISI involvement in the attacks.[91] Under severe international pressure, Pakistan arrested Lakhvi for his role as the mastermind of the attacks; one of his visitors at the jail was the ISI chief. Hafiz Saeed was put under house arrest but released soon thereafter; JuD was banned but continues to operate under new identities.[92] The LeT considered the operation a grand success and is reported to have planned several attacks against Indian and American targets to mark the first anniversary of the operation in 2009.[93]

Costs of the Mumbai Attack

Trehan, a high ranking Indian police officer, has estimated the yearly cost of a Pakistani terrorist fighting in Kashmir to be approximately $12,500 USD; that figure includes training, monthly payments, awards for a spectacular act, and money to family members.[94] Similarly, we estimate the following costs in U.S. dollars for various material and activities for the Mumbai attacks as shown below:

  • Personnel Costs ($12,500 per person)

$125,000.

  • Surveillance (money paid to David Headley)

$30,000.

  • Weapons and equipment ($1,500 each)

$15,000.

  • VOIP accounts

$500.

  • Total

$170,500.

If we add in funds for incidental expenditures, one can estimate that the Mumbai terrorist attack may have cost the LeT around $200,000 USD. When compared with LeT's overall annual budget (probably in the $50 million or more range),[95] it is evident that terrorism remains a low-cost endeavor.

Counter Measures and Recommendations

We turn now to the actions that have been and should be taken to more effectively constrain this violent wing of LeT. We will first look at the actions that have been taken by international bodies and India, as well as the limitations of those actions. Thereafter, we will offer some recommendations about how the systems could be improved to better combat the financing instruments of LeT.

At this juncture, it is important to highlight that even though LeT has gone global with its aims, it never ceases to use India as a target for two key reasons. One, LeT continues to serve as a proxy for Pakistan, which allows it to be sheltered by Pakistan; and two, its distorted form of Ahl-e-Hadith ideology declares India a mortal enemy. Therefore, it is necessary that we consider India's actions and its system to combat the financing of terrorists (CFT) in this segment as they form a critical part of the whole repertoire of measures that need to be taken against LeT.

International Response against LeT

The main actions taken by international actors to counter or constrain the financing instruments of LeT were to freeze and seize the assets of LeT leaders. Suffice it to note that these actions were targeted mainly at the movement of money.[96] These measures against LeT and its front organizations such as JuD were carried out either directly by the United Nations and the United States or indirectly through pressure applied to Pakistan. Below are some examples of the measures taken:

  • In 2002, Pakistan banned LeT, and the United States labeled it a foreign terrorist organization.[97]
  • At the request of India, the United States labeled Dawood Ibrahim an international terrorist in October 2003.[98] The U.S. government seized his assets found in the U.S. and pressured Pakistan to arrest him.
  • In 2008, the United Nations declared JuD a front organization for LeT. Because of this, the government of Pakistan was pressured into taking action. Assets of nine LeT leaders were seized. The main instruments applied were U.N. Resolution 1390 and 1373.[99]
  • Most recently, as noted earlier, the United States in 2010 exacted an executive order against The Falah-i Insaniat Foundation (FIF), essentially the renamed JuD, and named it a terrorist organization.

India's Responses against LeT

Similar to international agencies such as the United Nations and the Financial Action Task Force (FATF), India has come to regard terrorist financing as a key enabler of terrorist operations in and against India. It has likewise taken steps to address these terrorist-financing concerns. Below are some of the actions that India has taken to combat LeT's financing sources:

  • LeT was banned in India in 2001.[100]
  • As noted in the earlier section, through a bilateral arrangement with the United States, India was able to declare Dawood Ibrahim an international terrorist.
  • India banned hawala as the government knows most terrorist financing in India is done informally rather than through the formal financial system.[101]
  • One of the more recent measures taken was to join the FATF as a full member in 2009.[102] ;By doing so, India demonstrated its commitment to strengthening its legislative and regulatory system toward money laundering and terrorist financing. It is making those moves with the hope of constricting funding sources not only to LeT, but also to several other terrorist groups operating in India.

Limitations

Even though both international agencies and India have taken substantial steps against LeT, these measures have not been effective. This is demonstrated by the fact that LeT is still getting its funding not only from the government of Pakistan but also other overseas sources to support its operations. The key limitation in the international anti-money laundering (AML)/CFT system lies in the fact that its measures and recommendations are, by and large, nonbinding in nature, including both U.N. and FATF resolutions. For example, in applying U.N. Resolution 1373, India can do nothing against members of LeT residing in Pakistan. As India has no jurisdiction over LeT, it can only hope to prosecute LeT with Pakistan's cooperation.[103]

Unfortunately, Pakistan is not fully cooperative when it comes to fighting LeT, and its actions are often little more than cosmetic in nature. As already mentioned, the reasons for this response are three-fold. First, the LeT serves a strategic purpose for the government of Pakistan. LeT's goals are aligned with those of the Pakistani government; it has been reported that the Pakistani government considers LeT the most reliable terrorism asset it can wield against India.[104] Second, there are many ties between LeT and the ISI and Pakistan Army, which makes it hard for the latter to act against LeT. This is because the ISI, the Pakistan Army, and LeT all recruit their members from the Punjab and northwest regions of Pakistan, resulting in the members of all the groups having familial ties with one another.[105] Third, there could be severe blowback on the government of Pakistan from two main sources if it acts against LeT. The first potential source of trouble is the population that receives social services from LeT/JuD. As LeT/JuD continues to provide crucial social services to the Pakistani populace, any actions the government takes against the former will mean disruption of these services. The second potential source of blowback is from LeT itself. LeT has thus far not turned against the Pakistani government because of the impunity it enjoys in Pakistan. If the situation were to change, it is not hard to see that LeT might well join the rest of its counterparts (other terrorist groups in Pakistan) in fighting against the Pakistani government.

Within India, India's CFT system is fragmented and uncoordinated and has not evolved to the point where it can be used as an effective tool. According to Saini:

Terrorist financing-related information at present is not a priority for the central or state intelligence agencies...As a result, intelligence reporting on the issue lacks overall coordinated direction and is incident driven. Moreover, responsibility for the problem is diffused amongst a plethora of agencies, each working in watertight compartments, resulting in lack of accountability.[106]

In addition to using the anti-money laundering mechanisms, the entire CFT system is merely an enhancement to India's old methods for combating insurgencies in the past. As a result, terrorist groups such as LeT and its affiliates in India continue to be able to finance their operations in India not only through the formal but also the informal financial system.[107] These deficiencies in India's CFT system are reported in a FATF evaluation undertaken in 2010.[108]

Recommendations

The following are some recommendations that will, hopefully, help to mitigate these limitations. In the international arena, regional and global organizations need to continue to pressure Pakistan by making Pakistan more accountable for the actions of LeT, as well as its support organization and structures. Resolving the issue of Kashmir, clearly a difficult task, would also undermine support for LeT. This would reduce funding from Pakistan's expatriates supporting the J&K cause, and give the Pakistani government more freedom of action against LeT, which should lead to more effective countermeasures.

Internationally, organizations and states need to strengthen the AML/CFT system by adopting a more comprehensive monitoring and tracking system for charities; by making some measures more binding with the help of concrete evidence; by addressing the sources of funding from the Gulf region to LeT; and by putting more pressure on those states from which these sources are flowing, such as Dubai.

India, for its part, should strengthen diplomatic measures since most of India's terrorism problems are funded by external sources. It should continue to seek assistance from agencies like the FATF and the UN to act against supporters of LeT and affiliated groups operating in India. Also, bilateral arrangements with the U.S. will help in pressuring Pakistan. India should also aim to work more cooperatively with Pakistan to resolve the LeT issue.

Internally, India should set up a "whole of government" approach toward CFT, which crosses many domains, and should create an inter-government agency to coordinate and synergize efforts. India should also: bring the CFT system more in line with FATF standards; regulate NGOs and charities in India, including hawala (and perhaps consider lifting the ban on hawala so that it is not driven underground); give the intelligence and law enforcement agencies a more active role in CFT; build up dedicated resources to counter terrorism funding not only at the central government and state levels, but also at grassroots levels (e.g. police forces); enforce stronger border control, particularly with Nepal and Bangladesh; increase public awareness about the ills and concomitant effects of terrorist financing to create an environment conducive to building public trust in government policies; and leverage its population's skills in Internet technology, especially as terrorist financing is moving into the cyber domain.[109]

Conclusion

Today, LeT has global aims. LeT's funding sources have also diversified significantly and are no longer dependent solely on the government of Pakistan. The fact that LeT is still functioning and continuing to receive substantial financial support from various overseas sources means that the international CFT measures in place are not sufficiently effective. India's ineffectual system in constraining LeT's support to its affiliate groups in India further illuminates the gaps in the CFT measures against LeT. Cumulatively, all of this means more needs to be done. To this end, this article has attempted to provide some recommendations for how international and Indian CFT systems could be enhanced to constrict this lifeblood for LeT. More importantly, regardless of what strategy the international bodies and India are to employ, Pakistan must be included as part of the formula because Pakistan is still a strategic shelter for LeT. Without Pakistan's cooperation and active participation, LeT may never be eliminated.

About the Author(s): Geoffrey Kambere, from Uganda, Puay Hock Goh, from Singapore, Pranav Kumar, from India and Fulgence Msafir, from Tanzania, are all Naval Postgraduate School CTFP Fellows.


NOTES:

[1] Stephen Tankel, Lashkar-e-Taiba, Past Operations and Future Prospects (Washington, DC: New America Foundation, National Security Studies Program Policy Paper, 2011), 2, retrieved from http://www.newamerica.net/publications/policy/lashkar_e_taiba.

[2] Tankel, Lashkar-e-Taiba, Past Operations and Future Prospects, 2-3.

[3] C. Christine Fair, Leader-Led Jihad in Pakistan: Lashkar-e-Taiba and the 2008 Mumbai Attack (October 13, 2009), retrieved from Social Science Research Network website: http://ssrn.com/abstract=1753767; Bruce Riedel, "The Mumbai Massacre and its Implications for America and South Asia," Journal of International Affairs 63, no. 1 (Fall 2009): 115.

[4] "Lashkar-e-Taiba Overview" (December 21, 2008), retrieved from Intelligence and Terrorism Information Center website: http://www.terrorism-info.org.il/malam_multimedia/English/eng_n/html/gj_e002.htm; and "The Rise of Lashkar-e-Tayyiba: A Magnet for American Jihadis, " The Investigative Project on Terrorism, 2010, http://www.investigativeproject.org/documents/testimony/373.pdf, 5.

[5] Tankel, Lashkar-e-Taiba, Past Operations and Future Prospects,5.

[6] "Fatalities in Terrorist Violence," from South Asia Terrorism Portal website, http://www.satp.org/satporgtp/countries/india/states/jandk/data_sheets/annual_casualties.htm (accessed May 4, 2011).

[7] Husain Haqqani, "The Ideologies of South Asian Jihadi Groups," in Current Trends in Islamist Ideology (Washington, DC: Hudson Institute, 2005).

[8] Tankel, Lashkar-e-Taiba, Past Operations and Future Prospects, 3.

[9] Qandeel Siddique, What is Lashkar-e-Taiba (Oslo: Norwegian Defence Research Establishment,  2008).

[10] Tankel, Lashkar-e-Taiba, Past Operations and Future Prospects, 5, 9.

[11] Tankel, Lashkar-e-Taiba, Past Operations and Future Prospects, 7.

[12] "The Rise of Lashkar-e-Tayyiba," 8.

[13] Tankel, Lashkar-e-Taiba, Past Operations and Future Prospects, 40.

[14] Fair, Leader-Led Jihad in Pakistan, 8.

[15] "The Rise of Lashkar-e-Tayyiba," 9.

[16] Tankel, Lashkar-e-Taiba, Past Operation and Future Prospects, 19.

[17] "Lashkar-e-Taiba Overview," 48.

[18] Tankel, Lashkar-e-Taiba, Past Operations and Future Prospects,13.

[19] "Lashkar-e-Taiba Overview," 31-32.

[20] Fair, Leader-Led Jihad in Pakistan, 10.

[21] Stephen Tankel, Lashkar-e-Taiba: From 9/11 to Mumbai (London: The International Center for the Study of Radicalisation and Political Violence, 2009).

[22] Stephen Tankel, Lashkar-e-Taiba in Perspective: An Evolving Threat (Washington, DC: New America Foundation, Counterterrorism Strategy Initiative Policy Paper, 2010), from http://www.carnegieendowment.org/files/Lashkar-e-Taiba_in_Perspective.pdf (retrieved May 13, 2011);  Tankel, Lashkar-e-Taiba, Past Operations and Future Prospects, 12, 16, 18; "The Rise of Lashkar-e-Tayyiba," 10.

[23] Tankel, Lashkar-e-Taiba: From 9/11 to Mumbai, 16.

[24] Ashley Tellis, "Bad Company: Lashkar-e-Tayyiba and the Growing Ambition of Islamist Militancy in Pakistan," testimony to House Committee on Foreign Affairs, March 11, 2010, transcript retrieved from Carnegie Endowment for International Peace website: http://carnegieendowment.org/2010/03/11/bad-company-lashkar-e-tayyiba-and-growing-ambition-of-islamist-militancy-in-pakistan/jln, 4.

[25] Ryan Clarke, Lashkar-i-Taiba: The Fallacy of Subservient Proxies and the Future of Islamist Terrorism in India (2010) from the Strategic Studies Institute website: http://www.strategicstudiesinstitute.army.mil/pubs/display.cfm?pubid=973; Tankel, Lashkar-e-Taiba in Perspective, 2.; Tankel, Lashkar-e-Taiba, Past Operations and Future Prospects, 18.

[26] Tankel, Lashkar-e-Taiba: From 9/11 to Mumbai, 20.

[27] "The Rise of Lashkar-e-Tayyiba," 14.

[28] Fair, Leader-Led Jihad in Pakistan, 8, 9.  

[29] "The Rise of Lashkar-e-Tayyiba," 14; "Lashkar-e-Taiba Overview," 56.

[30] Tankel, Lashkar-e-Taiba, Past Operations and Future Prospects, 14; "The Rise of Lashkar-e-Tayyiba," 14; Clarke, Lashkar-i-Taiba: The Fallacy of Subservient Proxies, 16.

[31] Ashley Tellis, "Bad Company."

[32] Bill Roggio, "US Designates Lashkar—Taiba's Charitable Front as Terror Group," The Long War Journal, November 24, 2010, http://www.longwarjournal.org/archives/2010/11/us_treasury_designat.php (accessed May 10, 2011).

[33] Stephen Tankel, "Lashkar-e-Taiba in Perspective: An Evolving Threat," New American Foundation, http://www.carnegieendowment.org/files/Lashkar-e-Taiba_in_Perspective.pdf (accessed May 13, 2011);

[34] Abubakar Siddique, "Charity Linked to Lashkar-e-Taiba Under the Spotlight," Radio Free Europe, Radio Free Liberty, http://www.rferl.org/content/article/1358669.html (accessed May 2, 2011).

[35] Jyoti Trehan, "Terrorism and the Funding of Terrorism in Kashmir," Journal of Financial Crime; February 2002; Vol. 9, no. 3, at http://www.emeraldinsight.com/journals.htm7articles=1650632 (accessed May 9, 2011).

[36] Roggio, "US Designates Lashkar—Taiba's Charitable Front as Terror Group."

[37] Tankel, Lashkar-e-Taiba, Past Operations and Future Prospects, 14.

[38] Tankel, Lashkar-e-Taiba: From 9/11 to Mumbai, 1-17.

[39] Tankel, Lashkar-e-Taiba: Past Operations and Future Prospects, 10.

[40] Clarke, Lashkar-i-Taiba, 25-26.

[41] "Lashkar-e-Taiba Overview," 19.

[42] Declan Walsh, "WikiLeaks cables portray Saudi Arabia as a cash machine for terrorists," The Guardian, December 5, 2010, http://www.guardian.co.uk/world/2010/dec/05/wikileaks-cables-saudi-terrorist-funding.

[43] Jonathan Figel, "Pakistani-Jamal-ud-Da'wah: The Saudi Wahabbi Influence," http:// www.islamdaily.org/wahabism/6987.Pakistanjamat-ud-awal-thesaudi-wahabbi-influence.htm/ (accessed May 13, 2011).

[44] Figel, "Pakistani-Jamal-ud-Da'wah: The Saudi Wahabbi Influence."

[45] Walsh, "WikiLeaks cables portray Saudi Arabia as a cash machine for terrorists."

[46] "Lashkar-e-Toiba," from South Asia Terrorism Portal website: http://www.satp.org/satporgtp/countries/india/states/jandk/terrorist_outfits/lashkar_e_toiba.htm; Tankel, Lashkar-e-Taiba: Past Operations and Future Prospects, 7.

[47] Tankel, Lashkar-e-Taiba: Past Operations and Future Prospects, 10.

[48] Tankel, Lashkar-e-Taiba: Past Operations and Future Prospects, 10.

[49] Clarke, Fallacy of Subservient Proxies, 407.

[50] Tankel, Lashkar-e-Taiba: Past Operations, 10.

[51] Trehan, "Terrorism and the Funding of Terrorism," 207.

[52] Trehan, "Terrorism and the Funding of Terrorism," 207.

[53] Trehan, "Terrorism and the Funding of Terrorism," 208.

[54] Clarke, Lashkar-i-Taiba, 407.

[55] Clarke, Lashkar-i-Taiba, 407.

[56] Clarke, Lashkar-i-Taiba, 407.

[57] Trehan, "Terrorism and the Funding of Terrorism," 208.

[58] Jayshree Bajoria, "Lashkar-e-Taiba (Army of the Pure) (aka Lashkar e-Tayyiba, Lashkar e-Toiba; Lashkar-i-Taiba)," from Council on Foreign Relations website: http://www.cfr.org/pakistan/lashkar-e-taiba-army-pure-aka-lashkar-e-tayyiba-lashkar-e-toiba-lashkar--taiba/p17882#p2, (January 14, 2010); "Lashkar-e-Taiba Overview," 19.

[59] Bajoria, "Lashkar-e-Taiba."

[60] Trehan, "Terrorism and the Funding of Terrorism," 208.

[61] Clarke, Lashkar-i-Taiba, 407.

[62] Animesh Roul, "Lashkar-e-Taiba's Financial Network Targets India from the Gulf States," Terrorism Monitor, 7, no 19 (July 2, 2009): 8, from The Jamestown Foundation website: http://www.jamestown.org/programs/gta/single/?tx_ttnews[tt_news]=35221&tx_ttnews[backPid]=412&no_cache=1.

[63] Roul, "Lashkar-e-Taiba's Financial Network," 6.

[64] Roul, "Lashkar-e-Taiba's Financial Network," 6.

[65] Clarke, Lashkar-i-Taiba, 406.

[66] Clarke, Lashkar-i-Taiba, 406.

[67] Trehan, "Terrorism and the Funding of Terrorism," 207.

[68] Tankel, Lashkar-e-Taiba: Past Operations and Future Prospects, 11.

[69] Trehan, "Terrorism and the Funding of Terrorism," 207.

[70] Roul, "Lashkar-e-Taiba's Financial Network," 6.

[71] Roul, "Lashkar-e-Taiba's Financial Network," 12.

[72] Jan McGirk, "Jihadis in Kashmir: The Politics of an Earthquake," from the Qantara.de website: http://en.qantara.de/wcsite.php?wc_c=6175 (October 27, 2005).

[73] Tankel, Lashkar-e-Taiba: Past Operations and Future Prospects, 2.

[74] Tankel, Lashkar-e-Taiba: Past Operations and Future Prospects, 2.

[75]Tankel, Lashkar-e-Taiba: Past Operations and Future Prospects, 11.

[76] Tankel, Lashkar-e-Taiba: Past Operations and Future Prospects, 7.

[77] Tankel, Lashkar-e-Taiba: Past Operations and Future Prospects, 2.

[78] Tankel, Lashkar-e-Taiba: Past Operations and Future Prospects, 10.

[79] Trehan, "Terrorism and the Funding of Terrorism," 207.

[80] Trehan, "Terrorism and the Funding of Terrorism," 207.

[81] Trehan, "Terrorism and the Funding of Terrorism," 207.

[82] Tankel, Lashkar-e-Taiba: Past Operations and Future Prospects, 10.

[83] Roul, "Lashkar-e-Taiba's Financial Network," 6.

[84] Fair, Leader-Led Jihad in Pakistan, 6.

[85] Tankel, Lashkar-e-Taiba: From 9/11 to Mumbai, 25.

[86] Fair, Leader-Led Jihad in Pakistan, 16; "Lashkar-e-Taiba Overview," 66, 67.

[87] Rohan Gunaratna, "Mumbai Investigation: The Operatives, Masterminds and the Enduring Threat," UNISCI Discussion Papers, 19 (January 2009), from the UNISCI website: http://www.ucm.es/info/unisci/english/index.html.

[88] Tankel, Lashkar-e-Taiba, Past Operations and Future Prospects, 1, 16.

[89] Tankel, Lashkar-e-Taiba, Past Operations and Future Prospects, 38, 67.

[90] K. A. Kronstadt, International Terrorism in South Asia (Library of Congress, Washington, DC: Congressional Research Service,) (November 3, 2003); available from http://handle.dtic.mil/100.2/ADA444986.

[91] Fair, Leader-Led Jihad in Pakistan 12, 1 3.

[92] Tankel, Lashkar-e-Taiba: From 9/11 to Mumbai, 27, 28.

[93] Tankel, Lashkar-e-Taiba in Perspective, 4, 6.

[94] Trehan, "Terrorism and the Funding of Terrorism," 211.

[95] Trehan, "Terrorism and the Funding of Terrorism," 210

[96] S. K. Saini, "Problems and Prospects of Combating Terrorist Financing in India," Strategic Analysis 33, no. 1 (January 2009): 87; Chiranjeeb Das, "Organized Crime—Changing the Face of the World," from the Business Crime Bureau website: http://www.bcbegypt.com/english/Articles.htm, 5-6 (accessed May 10, 2011). The only regional body that is relevant to this fight against LeT is the South Asian Association for Regional Cooperation (SAARC).  While SAARC adopted a "Consensus on Terror Protocol" in 2004 as a holistic regional measure to fight terrorism, this protocol has not been efficacious due to deep mistrust between the parties in the body. The countries in SAARC are Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka.  For this reason, this article has excluded the discussion of the regional measures.

[97] Kronstadt, International Terrorism in South Asia, 2.

[98] Animesh Roul, "Dawood Ibrahim: India's Elusive Most Wanted Man," Militant Leadership Monitor, Vol. 1, no. 6 (June 30, 2010): 9. 

[99] Siddique, What is Lashkar-e-Taiba? 4. 

[100] Siddique, What is Lashkar-e-Taiba, 3.     

[101] Saini, "Problems and Prospects," 92.  Nevertheless, this move seemed to be controversial as many critics questioned its value.  By doing so, India is pushing the hawala system further underground, making it even harder to regulate and monitor.  Rather, a more effective way could have been to make it official so that the system can be better regulated.

[102] Financial Action Task Force, Anti-Money Laundering and Combating the Financing of Terrorism: India (Paris: FATF Secretariat, June 2010).  India joined FATF as a full member in 2009.  Since then, India has taken steps to bring its Anti-Money Laundering (AML) / Combating the Financing of Terrorism (CFT) system in line with the FATF's standards.  Some actions taken: (1) amendment of Unlawful Activities (Prevention) Act, 1967 (UAPA), in 2008; and (2) amendment of Prevention of Money Laundering Act, 2002 (PMLA) in 2009.  These amendments are meant to align India's system with the "requirements of the United Nations Convention for the Suppression of the Financing of Terrorism (FT Convention)."  However, the FATF report also noted that there were numerous gaps in India's AML/CFT system that needed to be addressed.

[103] Saini, "Problems and Prospects," 88.

[104] Tankel, Lashkar-E-Taiba: Past Operations and Future Prospects, 5-6. 

[105] Tankel, Lashkar-E-Taiba: Past Operations and Future Prospects, 9.

[106] Saini, "Problems and Prospects," 93.

[107] Saini, "Problems and Prospects," 93-94.

[108] For more information on the weaknesses of India's CFT system, see Financial Action Task Force, Anti-Money Laundering. For the purpose of illustration, some examples of these weaknesses are (1) India's ineffective judiciary system toward AML/CFT, (2) poor control of money movement across borders taking into consideration the large volume of human traffic flow as well as India's cash-based economy, and (3) a weak Suspicion Transaction Reporting (STR) mechanism.

[109] Saini, "Problems and Prospects," 91-96.

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