Krishna Sharma
Executive Summary:Terrorist groups in Pakistan frequently use high-denomination currency to finance their operations. Permitting a large number of high-value notes to be in circulation makes it easy for bad actors to transfer considerable amounts of money without a digital footprint, making illicit activities easier to conduct.
The relatively high availability of such bills in circulation in Pakistan is due to the country’s underutilization of electronic payment systems.
India previously faced similar issues, which were resolved in November 2016 by a sudden and unannounced elimination of 86 percent of the country’s currency in circulation. While not carried out to address terrorist financing alone, this move was found to have significantly contributed to the decrease in terrorist-related incidents in India.
Militant groups in Pakistan are intensifying multipronged, coordinated attacks against government security forces and foreigners. One contributor to the violence is the ease with which terrorist groups can finance their operations, particularly through so-called “faceless kings,” a term given specifically to high-denomination currency. Permitting a large number of high-value notes to be in circulation makes it easy for bad actors to transfer considerable amounts of money without a digital footprint. This makes any number of illicit activities easier to conduct, including drug smuggling and terrorism financing.
This financing method contributes to the destabilization of the country. Unless this vulnerability is addressed, Pakistan will continue to be imperiled by, in particular, jihadist violence from groups such as the Tehreek-e-Taliban (TTP), also known as the “Pakistani Taliban.” Thus, it may become imperative for Islamabad to consider demonetizing high-denomination currency and promote digital transactions in order to develop financial transparency.
Dangers of the ‘Faceless Kings’
Data from the Pakistan-based Center for Research and Security Studies indicates that Pakistani jihadist groups no longer “hibernate” during the winter before launching attacks in the spring and summer. The number of terrorist attacks in Pakistan has spiked fourfold in the last four years, with fatalities tripling over the same span (PAK Institute for Peace Studies, January 3). Notably, militant groups in the western provinces of Balochistan and Khyber Pakhtunkhwa, such as the Baloch Liberation Army (BLA), the TTP, and Islamic State in Khorasan Province (ISKP) have been responsible for a spike in violence (Al Jazeera, December 21, 2023). These groups utilize guerrilla tactics and modern military equipment, which depend on funding from both domestic and international supporters. In January, members of an Islamic State (IS) suicide squad trained in Pakistan killed at least 95 people at a gathering in Kerman, Iran. This twin bombing was the deadliest terrorist attack in Iran for decades and occurred during the observation of the fourth anniversary of the death of Iranian military officer Qasem Soleimani (Dawn, January 4).
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