As the government tightens rules on foreign funding, a bigger question remains unanswered: how much money is being misused and how long has it gone undetected?
The Timothy Puzzle
The Enforcement Directorate’s recent investigation into the US-based Timothy Initiative (TTI) has opened a Pandora’s box, exposing a potentially serious blind spot in India’s foreign-funding surveillance system. The agency reveals that TTI, which was not registered under the Foreign Contribution (Regulation) Act (FCRA), brought nearly ₹95 crore into India between November 2025 and April 2026 through foreign bank-issued debit cards instead of the prescribed banking channel.
The alleged mechanism is striking. The ED says 24 foreign debit cards were found with an individual intercepted at Bengaluru airport and 25 cards were eventually seized during searches. The cards, linked to Truist Bank in the US, were used repeatedly to withdraw cash from ATMs across several states. The agency says an online billing and accounting platform was used to record the withdrawals and their utilisation.
The investigation also traced approximately ₹6.5 crore in withdrawals to Dhamtari and the Bastar region of Chhattisgarh, both affected by Left-Wing Extremism (LWE). The ED has described the withdrawals as unusual and potentially linked to organised networks, and has raised allegations concerning religious-conversion activities and links to LWE-affected areas.
The significance of the case goes beyond the alleged ₹95 crore. TTI, according to the ED, did not bring foreign money into India through an FCRA account and then misused it. The money was brought into the country through a route that sat outside the conventional FCRA banking and reporting system.
That raises a question the government can no longer avoid: if nearly ₹95 crore could enter India via foreign cards without going through the normal FCRA route, what other foreign-currency movements could be escaping the regulatory net?
Beyond the Paper Trail
The FCRA system is designed to make foreign contributions visible to the government. Organisations receiving foreign money must register or obtain permission, receive funds through prescribed banking channels, file returns and maintain accounts. The basic assumption is that once foreign money enters India, there is a regulatory trail that can
be followed.
Sources observed that the TTI investigation raises the possibility of a different problem. Foreign money can potentially remain outside that system until it is converted into Indian cash and used on the ground. If that happens, the regulator may have no conventional FCRA transaction to examine in the first place.
The scale of the formal FCRA sector makes the challenge substantial. According to figures cited by PRS Legislative Research, 13,520 organisations received ₹55,741 crore in foreign contribution between 2019 and 2022. The FCRA portal showed 14,449 active certificates, 22,498 cancelled registrations and 15,212 registrations deemed expired as of July 15, 2026.
These numbers, however, do not tell us how much foreign funding has been misused. A cancelled or expired registration does not by itself mean that an organisation diverted funds or violated the law. Similarly, a valid FCRA certificate does not mean that the government has independently verified every rupee spent by an organisation.
That is the information gap at the centre of the problem. How many organisations have actually been found to have misused foreign contribution? How much money was involved? And how long did the alleged violations continue before they were detected?
The government’s own inspection record provides some indication of why these questions are difficult to answer. Between June 2019 and April 2022, the Ministry of Home Affairs recorded 335 inspections or audits of FCRA-registered associations. During the same period, 1,816 organisations were cancelled and 52 suspended, while 201 cases involving compounding of FCRA offences were recorded.
Contemporary reporting based on government data indicated that more than 60 per cent of the organisations inspected or audited had committed one or more compoundable offences. That figure cannot be extrapolated to the entire FCRA sector because inspected organisations were not a random sample and may have been selected precisely because they warranted scrutiny.
But one point is significant: when a selected group was examined closely, violations were found with considerable frequency. That brings the investigation back to the much larger number of organisations that are never physically inspected. The government cannot realistically inspect every FCRA association every year. “The real issue,
therefore, is whether it has a sufficiently effective risk-based system to identify organisations that require closer examination before suspected misuse becomes an enforcement case,” said one observer.
This distinction is often lost in the debate over foreign-funded NGOs. Registration, annual returns, and audits show that an organisation is
authorised to receive foreign funds and that they are reported on how they are used. But they do not necessarily establish that projects were implemented, beneficiaries reached, vendors delivered services or funds were spent as declared.
This leaves room for diversion, inflated expenditure, related-party payments, concealed donors, connected entities, exaggerated beneficiary numbers and spending outside approved programmes or locations. These are risk areas, not allegations against NGOs generally, but they show why effective enforcement must go beyond paperwork.
“Consider inflated expenditure”, says one insider. An organisation can have a valid FCRA registration, maintain the required bank account and produce audited books while the underlying transaction tells a different story. A consultancy fee could be inflated, a contract awarded to a connected company, equipment purchased at an unjustified price or a training programme reported at a scale that was never delivered. The accounting entry may exist. The harder question is whether the economic activity behind that entry actually happened.
Related-party transactions are another vulnerability. A vendor, consultant or contractor may appear independent but be linked to trustees, office-bearers or their relatives. Without examining ownership and control, legitimate-looking payments could ultimately benefit connected individuals.
The risk grows when several organisations share office-bearers, addresses, vendors, consultants or donors. Examining them individually may reveal little; analysing the network can expose money moving among connected entities. This makes relationship analysis crucial to modern financial enforcement.
Cash creates an even bigger challenge. Once funds are withdrawn, tracing the final recipient becomes harder. The TTI probe highlights this risk, with the ED alleging that foreign cards were systematically used to withdraw large amounts of cash in India. If established, it
would show how foreign money can potentially bypass conventional banking trails.
Geography and programme activity also require verification. An organisation may report spending in particular districts or on specific programmes, while the actual expenditure tells a different story.
Regulators must therefore verify not just the accounts but whether the declared activities actually took place.
The ultimate donor can present another gap. Foreign funds may pass through foundations, charities or intermediaries, meaning the immediate donor may not reveal the money’s ultimate source or controller.
Can India Trace the Money?
The existing issues, including the TTI case, do not establish that India’s foreign-funded NGO sector is broadly corrupt. Nor does the available evidence justify assigning any percentage of FCRA organisations to a “misuser” category. What it does establish is a more uncomfortable proposition: the state does not yet have enough publicly demonstrable verification to know the full scale of the problem.
Here comes the new and controversial Foreign Contribution (Regulation) Amendment Rules, 2026, notified on June 22, which introduce tighter scrutiny of key functionaries, activities, geographical areas and donors, along with enhanced reporting requirements. The bill proposes a mechanism, including a designated authority, for dealing with foreign-funded assets when an organisation’s FCRA registration ceases.
Observers say: “The direction is clear: the government wants greater visibility over who receives foreign money, who controls the organisation, what activities are undertaken, where the money is spent and who ultimately provides the funds.”
But more declarations and more forms cannot, by themselves, solve the central problem. What India needs is a financial-intelligence-based approach that connects FCRA information with banking transactions, donor identities, corporate ownership, tax records, related-party transactions, geographical activity and field verification.
The objective should not be to treat every foreign-funded organisation as suspicious. It should be to identify patterns that warrant investigation. It will be whether the government can answer four basic questions with evidence: How much foreign money is entering India? Where does it go? Who ultimately benefits? And was it actually used for the purpose for which it was received? Until the system can answer those questions, India’s FCRA regime may remain strong on compliance but vulnerable on the one test that matters most: following the money to its final destination.
GFX 1
SCALE OF FCRA OVERSIGHT
(2019-2022)
₹55,741 CR
Foreign contributions
(received by 13,520 organisations)
335
Inspections/audits
1,816
Registrations cancelled
52
Organisations suspended
201
FCRA offence-compounding cases
GFX 2
SIX HOLES IN THE NET
1 | INFLATED EXPENDITURE
Inflated fees, contracts, equipment or training costs.
2 | RELATED-PARTY PAYMENTS
Vendors or consultants linked to trustees, office-bearers or relatives.
3 | CONNECTED ENTITIES
Shared office-bearers, addresses, vendors, consultants or donors.
4 | CASH WITHDRAWALS
Cash makes the final recipient and end use harder to trace
5 | GROUND-LEVEL VERIFICATION
Did the project happen? Did beneficiaries receive the reported services?
6 | ULTIMATE DONOR
Tracing beyond the immediate donor to the source and controller of funds
GFX 3
THE ENFORCEMENT GAP
Accounting Entry ≠ ECONOMIC ACTIVITY
Effective FCRA enforcement must move beyond paperwork to verify:
WHO PAID → WHO RECEIVED → WHAT WAS DELIVERED → WHERE IT HAPPENED → WHO BENEFITED → WHERE THE MONEY ORIGINATED
