Our honourable Prime Minister has always referred to “choking the funds” as one of the key measures to mitigate the risk of terror financing and subsequently terrorism. Multilateral inter-governmental arrangements including Financial Action Task Force (FATF) are already making efforts to mitigate the risk from financial crime concerns. 

The recent analysis has highlighted the abuse of global banking networks for money laundering as well as terror financing using different typologies, including use of non-governmental organisations (NGO) as fronts to receive funds. This has helped to sensitise global financial institutions including banking industry to the wide spectrum of ways to perpetrate financial crimes which encompass terror financing, money laundering, hawala networks, drug & human trafficking and sanctions evasion among others. The global banks already have structures like Financial Intelligence Units and Anti-Money Laundering Units in place to prevent the abuse of their systems to perpetrate financial crime.

However, this blog intends to underline the vulnerability of a different money transfer channel, used by millions, for financial crime. A causal visit to any Indian Post Office will find several people queuing to send monies to their near and dear ones in the hinterlands of India. The money order has been in use for several years with postman delivering cash to the houses in Indian villages. While admiring the success of this system, a thought worries – can a terrorist organisation or an insurgent (Naxalites) group exploit this mechanism called money orders to finance their activities? Simple understanding suggests that post office does not demand PAN card or Aadhar card of the person who wants to send money; as such there is no way to track the remitter and beneficiary of the amount sent. This very fact, can attract the perpetrators of crime to exploit the system which can send money (cash) unchecked.  

As it is known, the amount which can be sent via money orders is much lesser than what one can remit via NEFT or IMPS. But a sum of money, the upper limit which can be sent via money order, can be used for recruitment of foot soldiers by any terrorist or insurgent group. 

Another scenario, rather more worrying, multiple people sending money (upper limit) via money order to a village which is a breeding ground for recruitment. If INR 100,000 is an upper limit, then imagine the amount 100 people can send from across the country to one such village where recruitment is to be done. 

Now the question is how can this be checked and that too without troubling the common Indian. While India still does not have formal structure to share intelligence among banks about concerning customers and transactions, working on the money order transaction data looks like a distant reality. But it should begin somewhere.