Sources of Terrorist Funding in Jammu and Kashmir

There are many sources made into use by the terror backing agencies, however, most of it is transferred by the ways that none can even think of- 25% from narcotics, 15% from illegal sale of arms, 10% through counterfeit currency, 10% through Zakat (an Islamic tax) & donations, 10% from international Islamic organisations & Organisation of Islamic Countries and 20% through extortion/bank robberies.

There are two main sources of terrorist financing-the diaspora and domestic. The latter includes co-ethnic, co-religionist groups which finance organised crime. The former includes the Pakistani State as well as Pakistani Kashmiris who are known to contribute to Kashmiri terrorist outfits operating on Indian soil.

It has been recorded that external funding is of a much higher magnitude than funding coming from domestic sources. Estimates indicate that between US $1,00,000-200,000 has been raised by JKLF, the diaspora and other Kashmiri groups. It is instructive to note that funding picks up in response to certain domestic events. For instance, the demolition of the Babri Masjid in 1992 led to large contributions to the kitty of terrorists operating against India.


Kashmiri terrorists obtain financial support from dozens of Islamic charities and radical Islamic organizations that channel funds to terrorist groups. The Al Rasheed Trust based in Karachi is run by Maulana Masood Azhar, was originally set up as a welfare organization. In the 1980s it was co-opted by the ISI to channel Saudi Arabian funds to the Afghan Mujahideen. After the Taliban took over in Afghanistan, the ISI shifted the Trust’s focus to Kashmir and used it to finance insurgency in Kashmir. It publishes advertisements in the Pakistani press asking for funds for “welfare work in Kashmir, Chechnya, Kosovo etc.” But it clearly informs donors that it will decide how to spend the money. For instance, it says, if there is a “dire need of the Mujahideen” the money will be used for their needs.

The Pakistan based Markaz-ul-Dawa-Ishad, the parent outfit of LeT and a religious organisation puts out regular advertisements in its in-house monthly magazine, Al Dawa. It urges Muslims to donate money for Kashmir ‘Jihad Fund’ and deposit it in bank accounts. The mushrooming growth of madrassas on the Indo-Pak border and in the interior provides an indication of the channels into which these funds flow. A visible aspect can be seen on Jammu-Srinagar National Highway where unaccounted open collections are made in front of mosques.


Encountering The Monster of Drug Addiction in Kashmir | Kashmir ObserverThe nexus between narcotics and terrorism had led to a new term Narco-Terrorism. It is recognized as one of the oldest and most dependable sources of terrorist financing, primarily because of the magnitudes of finance involved in both the activities. Arun Kumar, in his book on Black Economy in India says drug profits have been used to finance terrorism in the South, the North-East, Punjab and Kashmir.

Pakistan’s involvement in Narco-Terrorism dates back to the era of Soviet intervention in Afghanistan. President Zia’s involvement in narcotics trade is an open secret and he diverted some proceeds of this income towards funding the Kashmir ‘Jihad’ which continued even after his death. Narcotic smugglers based in Pakistan and controlled by ISI are reported to have earnings in excess of US $ 2.5 billion. According to a UNDP report, Pakistan’s heroin industry is estimated to have a turnover of US $ 74 billion. In early 1991, Pakistani Prime Minister Nawaz Sharief, is learnt to have said that, Pakistani Army Chief and the ISI Chief proposed a detailed ‘blueprint’ for selling heroin to pay for the country’s covert military operations.

Extortion and Fake Currency

Extortion has emerged as a major source of terrorist funding. Police and Intelligence agencies believe that most of the businessmen, shopkeepers, government employees, contractors, especially those dealing in timber and persons with sound financial background are easy targets. They have bought peace by coughing up, as and when extortion demands are made. During 1990-95, Rs. 7.30 crore was looted by terrorists to fund their activities. Needless to say estimates of extortion funds are impossible, but could run into several crores of rupees per year.

A perceptible increase in the circulation of fake Indian currency notes (FICNs) has been recorded in the recent past in the Kashmir Valley. Against seizure of FICNs worth 8,45,000 in 1995, the seizure in 2001 was 3.56 crore (FICNs are being sold at a discount of 60-70 per cent). Actual circulation would easily be several times this figure.

Seizures of FICNs specifically on the Indo-Pak and Indo-Nepal borders combined with the disclosures made by ‘carriers’ reveal indisputably that the ISI is behind this racket. It is easy to infer that counterfeiting confers double benefits: sabotaging the Indian economy and generating funds for terrorists activities.

Courtesy: Kashmir Rights Forum

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