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Take stock of terror funds

Terrorists covertly use stock markets not only as a source of funding, but also to cause economic instability in a target country.

india Updated: May 02, 2007 23:09 IST

Market-savvy terrorists would be the last thing on an edgy world’s wish list. Unfortunately, that’s exactly what terrorist groups are up to, going by the latest US State Department report about Pakistan-based Jaish-e-Mohammad dabbling in real estate and commodity exchanges to fund its terrorist activities. The Annual Countries Report on Terrorism 2006 says the JeM has also been the beneficiary of al-Qaeda funds. This will not raise many eyebrows as it is an open secret that a good part of terror funds is sourced from manipulation of the bourses. National Security Advisor M.K. Narayanan confirmed this during his address to the 43rd conference on security policy in Munich recently. Many fictitious companies engaging in stock market operations, particularly in the Mumbai and Chennai stock exchanges, apparently could be traced to terrorist groups.

Organised mafias and terrorists covertly use stock markets not only as a source of funding, but also to cause economic instability in a target country. Intelligence agencies have identified two methods generally used for this purpose: stock market operations — that help raise money and launder black money — and stock market manipulation, which artificially pushes stock prices up or down and trigger economic instability. Even before the 9/11 attacks in the US, intelligence agencies of Western countries knew of al-Qaeda’s extensive financial and business network operated through surrogates. Some of them were involved in stock market operations while others ran ostensibly legitimate businesses like travel agencies, construction companies, and real estate firms. Terrorist organisations have obviously been cunningly creative in using both legitimate and criminal activities to fund their operations. Thus, large-scale investments in legitimate businesses and stock market holdings run alongside hawala (money transfer without money movement), drug and alcohol trafficking, trade in weapons and precious metals, and kidnapping, extortion and armed robbery.

The lack of systematic data collection and analysis makes it difficult for security agencies and stock market regulating authorities to assess the real extent of terrorist use of alternative financing mechanisms. But that’s all the more reason for strengthening stock market regulations to detect and prevent attempts at manipulation. Perhaps intelligence and investigative agencies could make more use of technology (like the internet and surveillance software) to find terrorist money trails.

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