Discuss counterfeit currency and money laundering as major sources of terror funding in India. State the actions being taken at international level to check these menaces. Highlight the role of the Financial Action Task Force (FATF) and methods of compliance by its member countries in preventing terror funding.

Terror financing sustains illicit networks, while Fake Indian Currency Notes (FICN) & money laundering enable the movement and concealment of such funds. Recent FATF’s evaluation found India’s AML/CFT framework to be achieving “good results”, highlighting the importance of financial disruption in counter-terrorism.

Counterfeit Currency & Money Laundering as Terror-Funding Sources

1. Illicit Purchasing Power: FICN gives terror networks off-book purchasing power to finance logistics, recruitment & procurement while undermining monetary stability. (2009 Mumbai FICN case involved circulation of high quality counterfeit notes as part of an organised network).
2. Hawala-Based Transfers: Hawala enables movement of terror funds outside formal banking trails, facilitating covert financing. (In 2025 NIA narco terror case, drug proceeds were transferred through international hawala channels to fund Lashkar-e-Taiba operatives in India) 
3. Layering of Illicit Proceeds:Fraud, narcotics & organised crime generate illicit proceeds that can be routed through multiple accounts, shell entities & cash transactions, obscuring their origin before reaching terror networks. 
4. Emerging Digital Channels:Virtual assets & online payments can facilitate rapid movement and layering across jurisdictions; the Shivamogga ISIS case involved cryptocurrency-linked terror funding.
5. Economic Destabilisation: High-quality FICN can be smuggled through porous borders with Nepal, Bangladesh and Pakistan, creating illicit purchasing power and potentially disrupting monetary stability.

International Action against Terror Financing & Illicit Finance

1. UN Targeted Financial Sanctions: UNSCR 1267/1373 mandates asset freezes, travel bans & other targeted sanctions against designated terrorists and entities;ISIL–Al-Qaida sanctions regime is a key example.
2. International Terror-Financing Convention:1999 International Convention for the Suppression of the Financing of Terrorism requires states to criminalise terror financing, identify/freeze/seize terrorist funds and cooperate through extradition and mutual legal assistance; it has 191 parties.
3. Financial-Intelligence Cooperation:FIUs exchange financial intelligence through Egmont Group, enabling countries to trace cross border suspicious transactions & terrorist-financing flows; FIU-to-FIU cooperation is central to tackling transnational financial crime.
4. Cross-Border Law-Enforcement Cooperation:INTERPOL, UNODC and national law-enforcement agencies increasingly cooperate on international investigations, evidence-sharing and prosecution of money-laundering networks; joint 2025 FATF–Egmont–INTERPOL–UNODC handbook strengthened practical cooperation across jurisdictions.
5. No Money for Terror: Thisplatform promotes multilateral cooperation againsthawala, cash couriers, virtual assets & crowdfunding as emerging terror-financing channels, its 3rd Ministerial Conference hosted by India brought together 78 countries & 16 multilateral organisations. 

Role of FATF in Preventing Terror Financing

1. International Pressure: Use of Grey List (increased monitoring) & Black List (high-risk jurisdictions subject to enhanced counter-measures)by FATF incentivises corrective action & protect the international financial system.
2. Mutual Evaluation: FATF assesses countries through mutual evaluations, examining both technical compliance and effectiveness of their AML/CFT systems.
3. Risk Identification: It develops standards and guidance to help countries identify ML/TF risks, including emerging threats from virtual assets, shell companies & crowdfunding.
4. Global Standard-Setter: FATF establishes the 40 Recommendations as the global framework for combating money laundering, terrorist financing and proliferation financing.
5. International Coordination: It promotes cooperation among governments, FIUs, regulators & law enforcement agencies, creating common approaches to trace & disrupt terror financing.

Methods of Compliance by FATF Member Countries

1. Criminalisation & Asset Disruption: Criminalise terrorist financing & enable freezing, seizure & confiscation of terrorist assets; France has demonstrated strong effectiveness in confiscation & law-enforcement action through AGRASC.
2. KYC & Suspicious Transaction Reporting: EnforceCustomer Due Diligence (KYC), record-keeping & Suspicious Transaction Reports (STRs)to detect illicit flows; Singapore’s STRO uses financial intelligence to identify terrorist-financing risks.
3. Beneficial Ownership Transparency: Maintain accurate information on real owners to prevent shell entities from concealing illicit funds; Malaysia amended its Companies Act in 2024 & introduced e-BOS for beneficial-ownership reporting. 
4. Risk-Based Supervision: Conduct ML/TF risk assessments & strengthen supervision of high-risk sectors such as VASPs, money-transfer services & NPOs;India’s 2024 FATF evaluation recognised strong risk understanding but identified scope to strengthen risk-based CFT measures for NPOs.
5. Financial Intelligence & Information Sharing: Strengthen FIUs to analyse suspicious transactions and share intelligence domestically and internationally; France was assessed as achieving good results in use of financial intelligence and ML investigations by FATF.
6. International Cooperation: Enable mutual legal assistance, extradition, information exchange and cross-border asset recovery to pursue transnational terror-financing networks;Australia has a comprehensive framework for mutual legal assistance and extradition. 
7. Continuous Evaluation & Corrective Action: Implement FATF action plans & follow up recommendations to address identified deficiencies; UAE improved its compliance ratings on several Recommendations following its 2020 evaluation.

“Follow the money” is central to dismantling modern terror networks. India must therefore deepen real time financial intelligence, cross-border cooperation & technology-enabled monitoring, while ensuring privacy, due process & legitimate financial activity remain protected.