ePaper_2nd Edition_November 16, 2016

10
WEDNESDAY, NOVEMBER 16, 2016
DT
World
India’s fight against fake currency
• Tribune International Desk
Since November 8 midnight, Indians have
been experiencing a truly historic yet confusing
period after the government took the unprecedented
step of demonetising Rs500 and
Rs1000 bank notes.
Prime Minister Narendra Modi, in his address
to the nation, stated one of the reasons
for this policy was to counter the rising menace
of fake Indian currency notes.
Counterfeiting money has been prevalent
throughout history and is sometimes called
the world’s “second oldest profession.” Traditional
counterfeiters in most cases are individuals
or a group who counterfeit money for
their own profit. But during modern history, a
new phenomenon appeared: states involved
in counterfeiting the currency of enemy
states to destabilise their economy. For example,
during World War II, Hitler initiated “Operation
Bernhard” and counterfeited British
pounds. As a result Britain had to withdraw
most of its currency notes.
An Indian bank teller hands over notes as people gather inside a bank to deposit and exchange 500 and
1000 rupee notes in Amritsar on Tuesday AFP
Fake Indian currency notes on rise
In India, the circulation of fake Indian currency
notes (FICN) has been on the rise, according
to the Reserve Bank of India’s (RBI) annual
reports. The year 2014-2015 saw a steep rise,
with 594,446 FICN detected, up from 488,273
in the year 2013-14. When it comes to the type
of notes counterfeited in 2014-15, RBI data
showed that counterfeited Rs500 notes were
most common, with 273,923 recorded. Rs100
and Rs1000 notes were the second and third
most counterfeited bills, respectively.
India’s Financial Action Task Force
(FATF) report of 2013 found that the Indian
rupee was the ninth most counterfeited currency
in terms of its value and stood third
in terms of the number of FICN detected
around the world. This is a grave concern to
India and if not dealt with would have had
serious implications as counterfeit currency
can reduce the value of the currency and increase
inflation.
Transit points of fake currency
As reported by various sources, most counterfeit
Indian currency notes are printed in
Pakistan. From Pakistan, FICN are either
moved directly into India or make their way
through a network of other countries. Major
transit points include India’s neighbouring
countries Nepal and Bangladesh. Dubai is another
route that the traffickers use to smuggle
the fake currency notes into India; other
transit points include Thailand, Malaysia, and
Sri Lanka. China is emerging as a new transit
route. Pakistani nationals were involved in
48% of FICN cases in Thailand, Malaysia, Myanmar,
and Sri Lanka.
Printed in Pakistan, distributed by ISI
India’s Ministry of External Affairs for the last
decade has consistently shown concern over
ISI and its involvement in printing and distributing
FICN. DRI sources have also voiced
concern over the high quality of FICN, which
makes them difficult to distinguish from real
notes. Media reports from Bangladesh claim
that the fake notes are printed at government
presses in Karachi, Lahore, Peshawar, and
Quetta with the support of ISI.
Some of the important revelations that
indicate ISI’s role in FICN have come from
David Headley, who was convicted for his
role in the 26/11 Mumbai attacks. In his statement,
Headley mentioned that Major Iqbal,
who was his ISI handler, gave him FICN for
circulation and use in India. Another breakthrough
in allegations of direct involvement
by Pakistan authorities and ISI in FICN was
the arrest of Syed Abdul Karim Tunda in 2013
at the India-Nepal border. According to the
police, Tunda received several consignments
of FICN arranged by an ISI brigadier.
Economic terrorism
FICN, as mentioned earlier, could be seen as
a form of “economic terrorism” practiced by
external sources to damage India’s economy.
Economic terrorism refers to the behind-thescenes
manipulation of a nation’s economy
by state or non-state actors.
The printing and circulation of FICN provides
dual benefits for terrorist organisations
targeting India: the circulation of FICN threatens
India’s economy while the profit that is
earned from doing so is used to fund covert
activities targeting India. News sources claim
that ISI makes an annual profit of Rs5bn ($73
million) from these activities, given an average
of 30 to 40% profit on the face-value of
the notes. The same money is said to be used
to fund terrorist groups in India.
India’s fight to uproot fake currency
Given the multidimensional aspect of FICN,
the problem needs to be dealt with in a holistic
manner. Relevant agencies need to work
together. Already, separate organisations
have been taking steps. In 2010, India joined
the Financial Action Task Force (FATF), an
intergovernmental body seeking to fight
money-laundering and terrorist financing. In
2014, the Reserve Bank of India announced
the withdrawal of notes issued before 2005,
another measure to tackle the issue of FICN
and improve security features.
Modi, while addressing the nation last
week, implicitly accused Pakistan by saying
that “enemies across the border” have been
responsible for the circulation of FICN in
India. The decision to withdraw Rs500 and
Rs1000 notes from circulation could have a
massive positive impact by eliminating FICN
from India’s economy. The Rs500 note in particular
is the most commonly counterfeited
note in India and demonetising it is quite a
remarkable move to eradicate the threats emanating
from FICN to the Indian economy. •
[This is an excerpt of a The Diplomat article, which
can be found at http://bit.ly/2ezQXpH]