Hawala is a system wherein with nothing more than a telephone and a fax machine, money can be transferred anywhere with no questions asked, no names used, and no trail left for law enforcement. The Hawala route is used by the ISI and several other fundamentalist outfits in countries grouped under the Organisations of Islamic Countries (OIC) to send money to terrorist groups in J&K. Hawala funding is done through a network of dealers which extends from the OIC countries to Delhi, Mumbai and other places in India. 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 monies 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 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.  

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. 

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