In fact, among the most interesting aspects of the India Today sting operation was that the separatists who were exposed didn't seem at all surprised or suspicious that they were being offered money by middlemen from outside the state to provide protection for their operations and even create disturbances to further their interests. If anything, the terror financiers saw they are dealing with these reporters who were impersonating middlemen from mainland India as nothing out of the ordinary, almost as if it was business as usual.

Kashmiri militants obtain financial support from dozens of Islamic charities and radical Islamic organisations that channel funds to terrorist groups. 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 to Kashmir 'Jehad Fund' and deposit it in bank accounts. 12 At its annual congregation in November 1998 at Muridke, near Lahore, the Markaz decided to raise Rs 5 crore including 3 crores to supply weapons to the Kashmiri 'Jehad', 1 crore for training and 1 crore to rehabilitate Kashmir refugees in POK. 13

Several First Information Reports (FIRs) filed by the Jammu & Kashmir Police in 1997 indicate that the senior leaders of the APHC receive donations from abroad. The nexus between narcotics and terrorism had led to a new term-Narco-Terrorism. It is recognised as one of the oldest and most dependable sources of terrorist financing, primarily because of the magnitudes of finance involved in both activities.

Extortion has emerged as a major source of terrorist funding. Police and Intelligence agencies believe that most businessmen, shopkeepers, government employees, contractors, especially those dealing in timber and persons with a sound financial background are easy targets. Hawala funding through a network of dealers which extends from the OIC countries to Delhi, Mumbai and other places in India also feeds militancy. Many of these Hawala dealers have begun wholesale/retail businesses as fronts to divert money to the J&K militant groups. Pakistani Finance Minister Shaukat Aziz, a former executive vice president of Citibank in New York said that US $2-5 billion moves through the Hawala system annually in Pakistan. This is higher than the amount of regular foreign transfers through the country's banking system.

A US Treasury Department study identified Hawala as the preferred means of laundering money from drug trafficking and other crimes in Pakistan. The report said Pakistan, India and Dubai on the Persian Gulf from the Hawala Triangle to move money secretly worldwide. One Abdul Rehman was arrested on December 6, 2001, with Rs 15.5 lakh in Delhi. This money was coming from Dubai for HM. Further, on the same day, Rs 40 lakh coming from Hawala channels were recovered from a Kashmiri militant which was received by him through the Hawala channel. The Delhi Police arrested four Kashmiri militants on January 15, 2002, from the capital and seized Rs. 35 lakh from them. This money was received by militants from Pakistan through a Hawala operator in Chandni Chowk.

It can be safely concluded that terrorism in J&K is financed by a variety of sources, both national and transnational. While it costs the terrorists only a modest sum of money to destabilise the region and spread terror, the Indian government has to set aside huge outlays to tackle the problem. A more effective method of fighting terrorism would be to launch a multidimensional offensive against all the sources-narcotic trade, extortion, counterfeiting, fake charities-as well as methods of financing, namely, hawala and front companies.

(The author is a senior advocate in the Supreme Court and a geo-strategic expert. The views expressed are personal)