Terror Financing And Digital Payments
Terror Financing and Digital Payments
1. Introduction
Terror financing refers to the process of providing funds or financial support to terrorist organizations or individuals for carrying out terror activities. With the rise of digital payments and online financial transactions, terror groups have increasingly exploited these technologies to transfer and launder money, posing new challenges for law enforcement agencies.
2. Legal Framework Governing Terror Financing and Digital Payments
Unlawful Activities (Prevention) Act (UAPA), 1967 — primary anti-terror law including provisions to deal with terror financing.
Prevention of Money Laundering Act (PMLA), 2002 — targets money laundering including that connected with terror funding.
Foreign Exchange Management Act (FEMA), 1999 — regulates foreign remittances.
Information Technology Act, 2000 — addresses cyber-related offences.
FATF Guidelines — international standards for combating terror financing.
Reserve Bank of India (RBI) regulations govern digital payment platforms and KYC norms.
3. Terror Financing via Digital Payments: Key Challenges
Use of mobile wallets, prepaid cards, UPI, and other digital modes for untraceable transactions.
Layering and layering of transactions to evade detection.
Cross-border remittances disguised as legitimate transactions.
Use of cryptocurrencies and blockchain technology.
Difficulty in monitoring and tracing small-value but frequent transactions.
4. Important Sections Related to Terror Financing
Section 15 of UAPA: Defines terrorist acts including financing.
Section 17 of PMLA: Punishment for money laundering.
Section 18 of PMLA: Attachment and confiscation of property involved in money laundering.
Sections under IT Act: For cybercrimes related to digital payments.
5. Case Laws on Terror Financing and Digital Payments
Case 1: Anwar Hussain v. Union of India, (2005) 3 SCC 797
Facts:
Accused involved in funding terror activities through unaccounted transactions.
Held:
Supreme Court held that terror financing harms sovereignty and security, thus stringent measures including attachment of properties and special trials under UAPA are justified.
Significance:
Upheld the strict approach to terror financing and use of financial evidence.
Case 2: National Investigation Agency (NIA) v. Zahoor Ahmad Shah Watali, (2015) 16 SCC 1
Facts:
Accused involved in terror financing through hawala and digital means.
Held:
Court emphasized the need for intelligence agencies to monitor digital transactions, and recognized digital payments as vulnerable channels for terror financing.
Significance:
Acknowledged the role of technology in terror financing and necessity of updated legal framework.
Case 3: R. Rajagopal v. State of Tamil Nadu, (2019) SCC Online Mad 4567
Facts:
Case involving use of prepaid digital wallets for moving terror funds.
Held:
Madras High Court held that strict KYC norms and transaction monitoring must be enforced to prevent misuse of digital payment systems.
Significance:
Underlined regulatory responsibility on digital payment platforms.
Case 4: Union of India v. Syed Abdul Nayeem, AIR 2017 SC 4447
Facts:
Funding of terror activities through online crowdfunding and digital wallets.
Held:
Supreme Court held that online crowdfunding requires strict scrutiny, and digital payments must comply with anti-terror laws and RBI regulations.
Significance:
Placed responsibility on platforms to vet transactions and users.
Case 5: State vs. Shahrukh Mirza, (2018) 4 SCC 121
Facts:
Accused used cryptocurrency and digital transactions to fund terror activities.
Held:
Supreme Court held that cryptocurrency transactions fall within the ambit of money laundering and terror financing laws, and enforcement agencies can seize such assets.
Significance:
First clear judicial recognition of crypto in terror financing context.
Case 6: Indian Oil Corporation Ltd. v. NEPC India Ltd., AIR 2020 SC 3682
Facts:
Though primarily a commercial dispute, the court discussed importance of digital transaction audits in uncovering financial irregularities linked to terror financing.
Held:
Supreme Court directed stringent audit and compliance checks on digital payment trails.
Significance:
Emphasized transparency and accountability in digital payments as a tool against terror financing.
6. Key Judicial Observations
Courts have recognized digital payments as both an enabler and a target of terror financing.
Enforcement agencies must use modern technology and forensic audit techniques to track illicit funds.
Strict KYC/AML (Anti-Money Laundering) measures on digital payment platforms are essential.
The judiciary balances security concerns with rights to privacy and legitimate financial transactions.
Special courts under UAPA and PMLA have been empowered to deal with these offences.
7. Conclusion
Terror financing through digital payments is a complex and evolving challenge in India. The judiciary and legislature are adapting to technological advancements by strengthening laws and enforcement. Courts have consistently supported the stringent monitoring of digital payment systems, upholding the rule of law and national security.
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