The Complexity of Terror Financing in Kashmir: A Review


The intricacies of terror financing have long attracted the attention of academics, policy-makers and practitioners engaged in combating extremism and terrorism in various countries around the world. Despite numerous experts exploring various dimensions of terror financing, the landscape in Kashmir has remained largely unexplored in this regard. A contemporary research effort made in this regard is commendable and this commentary seeks to capture various strands of the findings made in the work done by Dr. Abhinav Pandya's recently released book, Terror Financing in Kashmir, which examines Pakistan's elaborate and multi-layered system of funding terrorism in the region in a comprehensive manner. An attempt has been made here to draw upon the conclusions made in the book, analyse them and create awareness on such an important topic.

Early Phase: 1990-96

Dr. Pandya underscores that in the early 1990s, financial transactions within the context of militancy were predominantly facilitated through cash couriers, exploiting the permeable nature of the border, notably the Line of Control (LoC), the de facto demarcation separating India and Pakistan in Jammu and Kashmir. Concurrently, Jamaat-e-Islami, a separatist and Islamist faction with backing from Pakistan, procured funds through a combination of donations and extortion. The initial stages of Pakistan's proxy war strategy did not provoke a robust response; however, observing a pronounced inclination among the youth to join terrorist groups a comprehensive system was established by the sponsors of terror, inclusive of financial modules, to sustain the insurgency. This culminated in the creation of the Hurriyat Conference in 1993, a political separatist entity amalgamating 26 separatist parties, necessitating financial resources for operational expenditures, cadre remuneration, publicity endeavours, media operations, and international travel.

Concurrently, coexisting with entities like Jamaat-e-Islami, extremist groups and terrorist organizations such as Hizbul Mujahideen, Jammu-Kashmir Liberation Front (JKLF), and emergent groups like Harkat-ul-Mujahideen required funding for arms procurement, Over Ground Workers (OGWs), and the execution of terrorist operations.

As militancy expanded, the landscape of terror financing underwent a transformation, adopting a specialized and systematic modality. Funds were channeled from Pakistan, funneled predominantly through the Hurriyat and the commanders of various terrorist groups. In tandem with traditional cash-based transactions, narcotics smuggling emerged as a formidable means of resource mobilization and transfer. This involved terrorist organizations strategically utilizing their cadres and covert couriers to infiltrate the Indian side of Kashmir for drug trafficking. The book delves extensively into the intricacies of drug routes, complemented by a comparative analysis of price differentials originating from the Af-Pak border, where these illicit transactions were initiated, to the Indian markets where they were ultimately delivered.

Second Phase: 1996-2005

As of 1996, the ebbing of the initial wave of militancy in the Kashmir region marked by the substantial counter-terror operations by Indian security forces. However, this lull was swiftly succeeded by the advent of new insurgent entities, notably Lashkar-e-Tayyaba and Jaish-e-Mohammad, each unequivocally operating under the aegis of Pakistani influence. This transitional phase introduced a paradigm shift in the operational dynamics of the conflict, engendering fresh challenges for extant security protocols.

Confronted with an augmented security apparatus, Pakistan adeptly recalibrated its approach to make funds available for these emerging groups. A discernible stratagem was the deliberate dissociation of drug conduits from channels employed for terrorist infiltration. This tactical maneuver sought to shield the drug trade from the heightened scrutiny and countermeasures instituted by Indian security forces. A salient facet of this recalibration lay in the pronounced reliance on hawala, an informal and frequently clandestine financial mechanism, as a principal conduit for the redirection of funds to sustain terrorist activities.

The operationalization of hawala in terror financing introduced a layer of financial opacity, conferring a discreet and intricate trail that impeded facile tracking by authorities. Grounded in trust-based networks, the hawala system facilitated the cross-border movement of funds with diminished visibility, thereby affording a measure of resilience against counter-terrorism endeavors. The accentuation of hawala during this phase underscored the adaptable stratagem employed by Pakistan to negotiate the evolving security milieu, ensuring a continual influx of financial resources to underpin militant endeavors in the Kashmir region. In essence, the post-1996 epoch delineated a nuanced transformation in the tactics orchestrated by Pakistan in buttressing militant groups in Kashmir.

The advent of novel entities and the strategic segregation of funding channels underscored the fluid and dynamic character of the conflict, mandating a perpetual recalibration in response to evolving security imperatives. The centrality of hawala in the orchestration of terror financing epitomized a calculated and responsive approach, adding layers of intricacy to the persistent challenges confronting counter-terrorism initiatives in the Kashmiri theater.

Third Phase: 2005 Onwards

Subsequently, there was a proliferation of innovative fundraising modalities, indicative of a departure from conventional fiscal practices. Noteworthy among these stratagems were the inception of atypical revenue streams, exemplified by the sale of medical seats, exploitation of Haj tours, and utilization of the Line of Control (LoC) trade for surreptitious smuggling operations. The ensuing period, meticulously chronicled within the scholarly work, unfolded a comprehensive and nuanced inventory of fundraising methodologies, emblematic of a complex and sophisticated financial landscape.

The detailed exposition encompasses a spectrum of practices, including infusion of Islamic principles into fiscal contributions which found expression through Zakat and Usra donations, serving as Islamic taxes earmarked for specific purposes. The financial ecosystem additionally incorporated remittances, contributions from the diaspora, and support from Islamic charities, each playing a distinctive role in fortifying the financial reservoirs.

Mirror trading, a technique characterized by parallel and offsetting trades designed to obfuscate the origin of funds, occupied a prominent position within this multifaceted fundraising landscape. Additionally, direct financial allocations by the intelligence apparatus of Pakistan underscored the strategic involvement of state entities in sustaining these financial conduits. Of equal significance was the financial backing garnered by Jamaat through its diverse engagements, spanning educational institutions, orphanages, and its facilitation of government recruitments.

During the 2000s there was a substantive influx of funds from the Arab world, attributed to the ascendancy of Ahli-Hadith influence in the Kashmir region. Intriguingly, these financial resources were earmarked for the construction of elaborate Salafi mosques. Paradoxically, however, these religious sanctuaries, ostensibly emblematic of religious devotion, transformed, perhaps inadvertently, into crucibles for cultivation of highly radicalized and separatist individuals. This intricate tapestry of fundraising, as delineated in the academic work, serves to illuminate the evolving dynamics of financial strategies in sustaining militant activities during this particular phase within the complex milieu of the Kashmir conflict.

Terror Funding Landscape: Intricate Dynamics

Quantitative assessments indicate that Pakistan spends a comparatively modest sum of approximately INR 2.5 to 3 lakh per militant. This stands in stark contrast to the considerable daily financial outlays incurred by Indian security forces in their ongoing counter-terrorism operations. Pandya unveils the substantial entanglement of mainstream institutions—spanning the realms of politics, administration, banking, academia, and media—within the intricate network of terror financing, thereby contributing to the establishment of a parallel economic network within the state.

Dr. Pandya's extensive empirical investigation, complemented by interviews conducted with both incumbent and former militants, Over Ground Workers (OGWs), Islamist clerics, leaders of extremist organizations, as well as representatives from law enforcement, military establishments, hawala operators, and financial coordinators affiliated with Pakistan's intelligence apparatus (ISI), serves as the cornerstone of this methodologically rigorous research endeavor. Given the inherent sensitivity of the subject matter, the scholarly work adopts a position of confidentiality, preserving the anonymity of sources and interviewees to uphold ethical standards and safeguard the security of those involved.

In conclusion, Terror Financing in Kashmir not only offers valuable insights for academics, counterterrorism researchers, law enforcement, diplomats, and the intelligence community but also distinguishes itself as a rare and impartial examination of Pakistan's role in the Kashmir conflict. Significantly, it steers clear of any anti-India bias, making it a significant contribution to comprehending the nuanced dynamics of the region. Additionally, Pandya's work delves into Pakistan's impact on fostering militancy, traversing various conflict phases. From the initial reliance on cash couriers and the establishment of the Hurriyat Conference to adaptive strategies in later stages, including the prominence of hawala, the book reveals the resilience of the terror financing network.

Pandya’s work sheds light on diverse financing methods and substantial differences in expenditure between Pakistan to spread terror and Indian security forces to stop it, highlighting the intricate involvement of institutions in shaping a parallel economy. The impartial analysis provided in the book positions it as an indispensable resource for anybody grappling with the complexities of terrorism in the region.

Dr Syed Eesar Mehdi is a Research Fellow at the International Centre for Peace Studies (ICPS), New Delhi. The views expressed are his own.