India Identified Terrorist Money Laundering Through Foreign Credit Card Use

On instructions from Finance Minister Pranab Mukherjee, the Intelligence Bureau has taken up the task of identifying a sudden quantum jump in the amount of foreign money flowing in the country through withdrawals by foreigners on credit and debit cards issued by foreign banks.

In his monthly review meetings, Mukherjee sought updates on this subject.

The IB warned that such money poses a serious security risk as it can be pumped into terrorist and other anti-national activities.

It started probing withdrawals after intercepting a highly volatile conversation on transfer of funds through credit cards.

Investigations led to eight states in particular, including

• Andhra Pradesh,
• Goa,
• Gujarat
• Maharashtra

....that have witnessed in recent times withdrawal of large sums of money by foreigners using the cards.

There is no way to track down the source of money and it is possible that some such withdrawals may be from funds transferred by terror organisations, sources said.

"If a terrorist outfit anywhere in the world deposits huge funds in a foreigner's account and he withdraws them daily in India in small quantum, we have no help from our banks to plug the mischief," the sources said.

They point out that the small withdrawals do not create suspicion, but totalling the money taken out on a daily basis will throw up a mind-boggling figure.

The sources said that IB has, therefore, not only alerted Union Home Secretary G K Pillai on this new form of funding for suspected anti-national activities, but it has also written to the finance ministry and the Reserve Bank of India to quickly put in place a system to monitor withdrawals of money by foreigners on their credit and debit cards.

Presently, there is no system to monitor transactions made by foreigners using these cards as they are recorded on the computer servers located abroad, which cannot be tracked unlike. Indian transactions, on the other hand, can be tracked as they are managed by the servers based in India, the sources said.

The IB hopes that the system will be able to assess and check the total amount of foreign money getting into the Indian system through these cards.

Last week, Pranab Mukherjee chaired a meeting on the inflow of the terror funds through different modes like hawala, ATMs and Western Union money transfers.

Since international obligations do not permit India to stop money transfers through Western Union, Mukherjee asked the banking department, RBI and IB to work together to find out a solution to check suspicious transfers. Other nations face the same problem

"We do not have control over the transfers that take place through servers in foreign countries," an official said.

As the withdrawals are in the Indian Rupee while the deposits in the foreign banks are in the US $ or other foreign currencies, there is also a risk of heavy foreign exchange outflow, the sources said.

They point out that India is not the only country facing this boom in credit and debit card withdrawals.

The United States is battling the problem as seen from a circular put up by the Commissioner of Internal Revenue on its website irs.gov about "repatriation of offshore funds using credit cards."

The circular says, "Credit cards (such as MasterCard and VISA) issued by tax haven domiciled banks are a preferred method used by US taxpayers to anonymously and covertly repatriate offshore funds that may or may not have been previously taxed.

American Express cards are used in the same way but differ in that these cards are issued directly by American Express rather than by member banks."

The IB has urged the RBI to devise a method to ensure that foreigners' card withdrawals are put under scrutiny and those taking out huge sums through ATMs in India are reported to the authorities to keep a check on their activities.

It has also suggested that ATMs should be calibrated to refuse withdrawals on foreign banks' cards after an individual reaches a particular limit of money taken out over the period of his or her stay in India.

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