Hi-tech portal to track terror funding, cash laundering, but needs strong oversight

This portal gives various law enforcement agencies access to financial transactions that they need to investigate crimes.

BySrinivas Kodali

Published Apr 10, 2024 | 2:00 PMUpdatedApr 10, 2024 | 2:00 PM

Hi-tech portal to track terror funding, cash laundering, but needs strong oversight

India’s security agencies, such as the National Investigation Agency, Enforcement Directorate, and Income Tax Department, have access to large amounts of financial information on all financial transactions, which helps them with investigations.

The NIA recently summoned a BJP party worker based on UPI transactions he has carried out with a terror accused. The Enforcement Directorate, focused on money laundering, always looks into payment transactions as part of their investigations. But how do they do it? The Financial Intelligence Unit’s FIN-GATE portal is designed for this purpose.

The tracking of terror funding and drug money, especially cash laundering, has been a challenge in India; this is changing with Aadhaar, Demonetisation and UPI. The Prevention of Money Laundering Act (PMLA) has historically helped security agencies.

PMLA was enacted in 2002 after the UN push to clamp down on the international drug problem. It created an Anti-Money Laundering (AML) regime under the Financial Action Task Force (FATF). PMLA drives Know Your Customer (KYC) rules with Aadhaar, where all banking transactions must adhere to the AML regulations.

Also read: ‘BJP misusing agencies’

Centralized KYC information

All financial institutions have to follow the Reserve Bank of India’s norms on KYC and share this information with the Financial Intelligence Unit (FIU), which reports to India’s Economic Intelligence Council headed by the Finance Minister.

Under FIU, all suspect banking information is centralized, with KYC reporting transactional details, including when cash is withdrawn and deposited in banks. The reported information ranges from cash transactions at ATMs, banks, casinos, cross-border wire transfers, IMPS, NEFT, UPI, and Wallets. KYC of individuals and institutions, both for-profit and non-profit, are all collected and shared with FIU.

The FIN-GATE portal manuals provide insight into how FIU collects this information across various financial institutions. This portal gives various law enforcement agencies access to financial transactions that they need to investigate crimes.

The government of India made various amendments to existing income tax laws and PMLA to force Aadhaar to link to PAN cards and force Aadhaar-based KYC for bank accounts, wallets, and a host of institutions. The Supreme Court judgement on Aadhaar prohibits the government from making Aadhaar mandatory for bank accounts while upholding the PAN-Aadhaar linking for taxation.

FINGATE 2.0 portal with KYC for individuals collecting a variety of identity information

Post the 26/11 Mumbai attacks, security agencies have increased their surveillance efforts, tracking terror financing and cracking down on crime networks. The Government of India brought in a variety of laws and technology infrastructures to help support this, including Aadhaar, NATGRID, CMS, CCTNS, FIN-GATE, etc.

These intelligence infrastructures centralize information for law enforcement and security agencies to conduct surveillance and investigations.

The current playbook of a security agency is to use information, money and networks to understand criminal groups and clamp them down.

The FIN-GATE helps understand the flow of money to identify various networks that transact for various business requirements in society.

Also read: ED files money laundering case

Tracking money flow

It can help crack down on money laundering and money-related frauds like OTP-Fraud, Aadhaar Enabled Payment System Fraud, and QR code Frauds, where people lose money.

If an individual has been subjected to social engineering fraud, lost money from his bank account to a con man, and filed a police complaint, law enforcement agencies use FIN-GATE to track the money flow.

Once fraud has occurred, the money is usually taken out of ATMs or moved through various bank accounts before the fraudster cleans it. To prevent this, enforcement agencies suspend not only the fraudsters’ bank accounts where money was first transferred but also all the other bank accounts in the network to which money was transferred.

So, if a fraudster uses UPI to pay for tea that he has consumed in a cafe, law enforcement agencies have in the past shut down the cafe’s bank account until they investigate the crime.

There have been multiple incidents of police suspending people’s UPI and bank accounts as part of crime investigations, even though they are not involved in the crime.

The NIA is tracing the entire network of the Rameshwaram cafe blast to trace other culprits who may have been involved in the incident. The standard playbook of investigation agencies is now to use information surveillance, financial surveillance and the power of networks to crack down on entire gangs.

This playbook emerged in the United States after 9/11, where the US forced biometrics and surveillance of the internet, used its position of dollar to track financial transactions internally and used this to threaten to ban anyone from using the dollar if they help terrorists.

In “Underground Empire: How America Weaponized the World Economy,” authors Henry Farrell and Abraham Newman trace how the United States started spying on everyone’s financial transactions and the world economy wherever the dollar was used.

Related: NIA probes Rameswaram cafe blast

Need for oversight

The United States further used this to bully Iran, China, Russia, and North Korea by imposing sanctions on them for helping actors the US deems a threat to their national interests.

This play is unfolding differently in India, with the need for more oversight by some intelligence agencies, such as the Enforcement Directorate (ED). The NIA and ED, with their newly acquired powers and surveillance tools, have been using them to target political opposition in India.

Before they went after political opposition, the Ministry of Home Affairs cut down the Foreign Contribution (Regulation) Act (FCRA) licences of all significant NGOs that work on rights in India. Then, they went after journalists and human rights activists, arresting them under fictitious national security charges.

These new surveillance structures that have been developed to help address issues of terrorism are being misused by political parties and are harming Indian democracy at large. During this year’s FATF review of India’s Anti-Money Laundering rules and implementation, the civil society produced a shadow report shared with the FATF review committee on how these rules are being misused to target human rights groups.

The Rameshwaram cafe blast highlighted how security agencies function and their practices. The problem in India is how these agencies are going rogue and misusing their powers. A lack of debate on surveillance reform and no interest in enforcing the fundamental right to privacy are costing India its democracy.

Privacy is not secrecy, and no one is asking India’s security agencies to shut down or stop functioning, but where is the democratic oversight?

(The writer is a researcher focusing on digitization and a hacktivist. Views are personal.)

(Edited by VVP Sharma)