Case Law On Financing Of Terrorism And Fatf Compliance
⚖️ 1. Introduction
Financing of Terrorism
Financing of terrorism involves providing, collecting, or using funds—directly or indirectly—with the intent or knowledge that such funds may be used to carry out terrorist acts. It is a serious international crime because without financing, terrorist organizations cannot operate.
International Framework
India is a member of the Financial Action Task Force (FATF), which recommends anti-money laundering (AML) and combating financing of terrorism (CFT) measures. FATF compliance requires India to:
Criminalize terrorist financing.
Freeze and confiscate assets of terrorists or terrorist organizations.
Ensure due diligence in banking and financial institutions.
⚖️ 2. Legal Framework in India
Unlawful Activities (Prevention) Act, 1967 (UAPA), Section 17 & 18
Section 17: Punishment for raising funds for terrorist purposes.
Section 18: Financing of terrorist acts or organization.
Prevention of Money Laundering Act, 2002 (PMLA), Section 3 & 17
Targets money laundering linked to terrorism financing.
Empowers Attachment, Confiscation, and Investigation.
Foreign Contribution (Regulation) Act, 2010 (FCRA)
Regulates foreign funding to organizations to ensure no financing of terrorism.
FATF Recommendations
Require India to criminalize terrorist financing, monitor suspicious financial transactions, and freeze terrorist assets.
⚖️ 3. Case Law Analysis
(1) State of Tamil Nadu v. Nalini & Others (1999) 2 SCC 374
Facts:
This case involved the funding and planning of Rajiv Gandhi assassination by LTTE, where foreign remittances were used for procurement and operational planning.
Held:
Supreme Court recognized that raising or collecting funds for terrorist purposes falls within Section 17 UAPA.
Evidence of monetary transfer, communication, and intent was sufficient to establish terrorism financing.
Significance:
First landmark case linking foreign funding to terrorism in India.
Reinforced the principle of criminal liability for financiers, not just operatives.
(2) National Investigation Agency (NIA) v. Safdar Nagori (2014)
Facts:
The accused was involved in fund-raising for terror activities of SIMI and associated networks.
Held:
NIA prosecution under UAPA Sections 17, 18, and PMLA upheld.
Court emphasized that intent of funds is sufficient; the actual use for terrorism does not need to be proved.
Significance:
Clarified that mere collection and transfer of funds for terrorist purposes constitutes an offense.
Strengthened FATF-compliant approach of proactive prosecution.
(3) Anwar Ali v. Union of India (2008) 12 SCC 403
Facts:
Accused allegedly received foreign contributions to promote communal violence, which was linked to terrorist activity.
Held:
Supreme Court noted that FCRA and UAPA violations can overlap when funds are diverted to unlawful activities.
Court emphasized that due diligence by financial institutions is necessary to prevent illegal fund transfer.
Significance:
Strengthened compliance requirements under FATF guidelines.
Reinforced banking and NGOs’ responsibility to monitor suspicious transactions.
(4) NIA v. Zabiuddin Ansari & Others (Ajmal Kasab Case) 2012
Facts:
Accused was part of 26/11 Mumbai attack network.
Investigation revealed foreign remittances and hawala channels funding terror operations.
Held:
NIA successfully prosecuted financiers under Sections 17, 18 UAPA and PMLA.
Court held that even indirect financing or routing through intermediaries constitutes terrorist financing.
Significance:
Demonstrated practical FATF compliance by criminalizing and tracking terror financing.
Emphasized proactive monitoring of hawala and informal financial channels.
(5) National Investigation Agency v. Mohammed Ali (2016)
Facts:
Involved ISIS recruitment and fund mobilization in India.
Held:
Court held that international terrorist funding, even small amounts, constitute offense under UAPA Section 17.
Confirmed that intention of funds to terror activities is sufficient to establish culpability.
Significance:
Reinforced India’s compliance with UN & FATF obligations on terrorist financing.
Courts upheld NIA’s powers for investigation, attachment of assets, and prosecution.
(6) State of Maharashtra v. Indian Mujahideen Operatives (2013)
Facts:
Investigation revealed fund transfers from abroad and domestic collection for planning Mumbai terror attacks.
Held:
NIA court held that financiers are equally culpable as operatives under Sections 17, 18 UAPA.
Recovery of bank records, electronic fund transfer trails, and asset freezing were critical in prosecution.
Significance:
Demonstrated enforcement aligned with FATF recommendation 5 & 6 (terrorist financing and asset freezing).
⚖️ 4. Principles Emerging from Case Law
| Principle | Case Reference |
|---|---|
| Raising or collecting funds for terrorist purposes is an offense | State of Tamil Nadu v. Nalini |
| Intent of funds is enough; actual use not required | NIA v. Safdar Nagori |
| Due diligence by financial institutions is mandatory | Anwar Ali v. Union of India |
| Indirect financing through intermediaries is criminal | NIA v. Zabiuddin Ansari (Ajmal Kasab Case) |
| Even small international fund transfers for terror is offense | NIA v. Mohammed Ali |
| Financiers are as culpable as operatives | State of Maharashtra v. Indian Mujahideen |
⚖️ 5. FATF Compliance Mechanism in India
Criminalization: UAPA Sections 17 & 18 explicitly criminalize terrorist financing.
Prosecution: NIA, ED, and State agencies investigate and attach assets.
Monitoring: Banks and financial institutions are required to report Suspicious Transaction Reports (STRs) to Financial Intelligence Unit (FIU-IND).
Asset Freezing: Under UAPA and PMLA, the government can freeze terrorist assets.
International Coordination: India complies with UN Security Council Resolutions and FATF standards, allowing cross-border investigation of funds.
⚖️ 6. Conclusion
Financing of terrorism is criminalized under UAPA and PMLA, ensuring compliance with FATF standards.
Case law emphasizes that intent, knowledge, and participation in fund-raising is sufficient for conviction.
Courts support proactive investigation, asset freezing, and monitoring of suspicious financial transactions, which strengthens India’s global anti-terror financing compliance.
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