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Finance ministry on terror money trail
November, 24th 2006

It is not only the income tax sleuths who are trailing cash transactions to unearth tax evasion. To detect funding of terrorist activities, the finance ministry is likely to track all cash inflows to individuals and non-corporate organisations from abroad that exceed Rs 10 lakh.

A recent meeting attended by representatives of the banking and revenue departments in the finance ministry, home ministry, IB and RAW had mulled the feasibility of setting a Rs 1 lakh upper limit, but instead settled on the Rs 10 lakh bracket.

This is part of the initiatives to block terrorism financing, that India is committed to as part of the international anti-money laundering network.

For the government the issue is significant, as there has been a large spurt in inflow of funds into the country. The voluntary sector, for instance, is expected to receive at least Rs 5,029 crore in 06-07 from foreign organisations as per government estimates. The sector received about Rs 4,300 crore from abroad in 05-06.

While most of the flow is meant to finance genuine development activities, the government is concerned about the potential for mischief by the rogue organisations, unless the reporting and monitoring mechanisms are made more tough. So, tracking the flow of funds from different sources has become critical to the policy makers. The Rs 10-lakh threshold will be put in the rules by the government, after the cabinet and Parliament clear the amendments to the Foreign Contribution Regulation Act (FCRA), 1976.

The government has apparently also prepared a dossier on suspicious organisations, which are working as fronts for terrorist groups.

The reporting mechanism is expected to throttle all flows to terrorists since there is an alert over terrorist attacks on vital installations.

Security agencies had initially sought tracking of all cash transactions exceeding Rs 1 lakh, but the finance ministry felt that this limit was too low.

The newly-established Financial Intelligence Unit will be the nodal agency for receiving the information under the FCRA. This information will then be made available to CBI, IB and other security agencies.

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