India faces an increasing inflow of counterfeit currency, produced primarily in Pakistan, and terrorist and criminal networks use this money to finance their activities in the country according to the US government’s 2011 International Narcotics Control Strategy Report of the State Department.
Noting that India is a significant target for terrorist groups, both external and domestic, the report said 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.
Terrorist groups often use counterfeit currency and hawala operatives, as well as physical cross-border currency smuggling, to move funds from external sources to finance their activities in India.
The State Department report recommends that the Indian government should press for presidential approval to implement the Foreign Contribution (Regulation) Act 1976, which would extend foreign contribution reporting requirements to any non-profit organisation that has a political, cultural, economic, educational or social focus and automate notification of suspicious transactions.
The Indian government should also extend the Prevention of Money Laundering Act to include gem and precious-metals dealers, real estate agents, lawyers, notaries, other independent legal professionals, accountants, and commodity futures brokers.
