Recent cases suggest some operatives are using terror money for such ends as hiring prostitutes or going into the real estate business.
While jihadi extremists claim to be fighting for Islamic principles, some of the money their organisations raise is apparently being used to satisfy personal whims, several recent cases suggest.
Instead of going to recruitment efforts or to support extremist operations, funds raised by extremists groups have been spent to entertain female companions, pay off personal debts or even to help terrorist leaders become wealthy businessmen, investigators say.
Indian Mujahideen (IM) chief Yasin Bhatkal, known as Shahrukh, may be best known for masterminding bloody attacks such as the February 13th, 2010 German Bakery blast in Pune that killed 17 and injured as many as 50. But investigators say he was simultaneously pursuing an aspiration to become a real estate mogul – and using IM funds to help achieve that dream.
"Bhatkal had invested about Rs 14 lakh ($25,100) in a Nala Sopara [development] project last year. The accused had received the funds from his mentors from abroad in 2010," former Maharashtra Director General of Police (DGP) K. Subramaniam told Khabar South Asia.
"The funds were meant for the legal expenditures of jailed IM members. However, the money was not spent on that."
Mirza Himayat Baig, a Lashkar-e-Taiba (LeT) operative arrested in June for his alleged connection with the German Bakery blast, is yet another example, says Pune Anti-Terrorism Squad Deputy Inspector General Sanjay Latkar.
"During interrogations, Baig confessed that his sponsors had sent Rs. 12.5 lakh ($22,400) to conduct the mission," Latkar told Khabar. "However, it was later learned that he spent about Rs. 10 lakh ($17,900) on the operational expenses of the mission, while the remaining amount was spent on payment of personal debts."
Those using terror funds for personal gain are able to take advantage of hawala – an illegal system of money transfer through brokers. While helping cover up the source of funds, some of which come from organised crime, the system also makes it easier to divert money towards personal use.
"The police are now very sure that IM enjoys underworld backing and they receive funds from the underworld via hawala," Maharashtra Criminal Investigation Department (CID) Additional Director General of Police S P Yadav told Khabar.
According to K Srinivasan, deputy inspector general of the Border Security Force, terrorist outfits move money across the LoC (Line of Control) separating the Indian and Pakistani-controlled parts of Kashmir.
"They use the porous border to flush hawala funds into India, and this money goes into the hands of terrorist outfits," he said.
The availability of these funds, however, may lure some who combine Islamist ideology with more venal desires, as the case of murdered IM suspect Qateel Siddiqui suggests.
Siddiqui met his end in June, allegedly at the hands of two fellow inmates Pune -- local gangland figure Sharad Mohol and his aide Alok Bhalerao at a high-security prison. The reasons behind the slaying remain unclear. But revelations Siddiqui is said to have disclosed to police would have given fellow jihadists cause for anger.
IM is believed to have given Siddiqui, suspected of involvement in attacks on Chinnaswamy Stadium in Pune in 2010 and Jama Masjid in Delhi last year, Rs. 100,000 ($1,800) in order to help him recruit new members.
But Siddiqui did not use the money for the intended purpose, squandering it instead on women, investigators say.
"During interrogations, Siddiqui used to evade all questions pertaining to the source of his funding. However, on one occasion he did admit that he received the funds through hawala from Pakistan, rerouted via the United Arab Emirates. He also revealed his passion for being in the company of beautiful girls and [that he] spent lavishly on them," said Nehchal Sandhu, Director of the Intelligence Bureau.
"Most of the money he received from abroad was spent on luxury and call girls, with very little to spare for the activities of IM, which, he claimed, he joined for the money," Sandhu said.