A Joint Investigation Team in Punjab has been surveying the bank accounts of 200 seminaries in Punjab, and it has discovered that none of them channelled any substantial funds through their accounts.

So either these institutions, some of which are quite large, are operating on minuscule budgets, or they are using channels to receive funds and make payments that conceal their transactions.

The JIT now intends to question the management of each of these institutions to find out where they are receiving their funds from and how they process their transactions.

The JIT would be well advised to first study the myriad options available to anyone in the informal economy to make payments as well as send and receive funds from abroad. Otherwise, it is possible the management of the seminaries could talk circles around them during questioning.

The example of the massive growth of hundi and hawala in the past few years provides a good starting point. By some reported estimates, gleaned from exchange companies, the illegal hundi and hawala trade has crossed $15bn annually.

The case of gold imports offers an example: imports of gold as shown in official figures are tiny, but the ready availability of the precious metal in markets around the country, as well as the relative stability of its price, indicates that large quantities are being imported. However, their value is not reflected in official data because the payments are processed through informal channels.

There are numerous other examples, such as the misdeclaration of the value of goods in foreign trade, or the straightforward transfer of funds across national boundaries through cash carriers or hundi and hawala operators.

A very large payments system exists in the country for managing bulk cash transactions, or cross-border payments and remittances, which conceals the transaction from the authorities in order to evade taxes and duties, or other regulatory requirements and limitations. The same system can also conceal the transactions of militant groups and their facilitators and handlers.

The findings of the JIT suggest that large-scale concealment of cash flows by seminaries suspected of involvement in militant activities is widespread. They may be conducting part of their operations in cash, or using bank accounts belonging to other people in their network, which would not show up in the investigation being carried out because it is focusing entirely on bank accounts registered in the name of the seminary under investigation.

In order to curb terror financing, it will be necessary to also tackle the large informal payments economy, which means more attention being paid to measures to detect and shut down hundi and hawala as well.

So long as these informal channels exist, militant organisations will always find ways to carry on with their transactions without fear of detection. The effort to curb the informal payments economy is, therefore, a necessary part of the larger fight against terrorism and militancy.

Published in Dawn, January 2nd, 2016