Police arrested Mohd Shaukat Ali (37), of Sardha in Malda district of West Bengal and K Venkata Satyanarayana Reddy (38) of Yanam at a hotel in the city and seized Rs36 lakh fake notes in Rs500 and Rs1,000 denominations from them.

The main accused in the case Nutfal Shaik, a resident of Baikul village in Shibgunj police limits in Bangladesh was the key man who was in touch with terror groups and some Inter-Services Intelligence (ISI) agents. In Bangladesh, he is known to be a businessman but his main trade is pumping fake currency notes into India. Available inputs suggest that he has a well-knit network and several youths from various parts of West Bengal, including Malda and Murshidabad are working for him in India.

The police sources stated that most of the fake currency racketeers are linked either to the ISI, the Dawood Ibrahim gang or Bangla based terror groups. Police suspects that the money is being used for terror and underworld activities of jihadi groups and gangsters.

City police commissioner, B Prasada Rao said that the fake currency racket has international ramifications. According to him, the racketeers sometimes threw shipments of currency over the fence in Bangladesh border when Border Security Force (BSF) guards were away.

The smugglers reach the city from Kolkata by train, he said. It is believed that the racketeers take the help of illegal immigrants from Karimnagar, east and west Godavari districts, Nizamabad and Kadapa to smuggle in fake currency on the air route. They are wrapped in carbon papers so as not to be detected by X-ray machines at airports.

In August 2007, police seized counterfeit currency of Rs2.36 crore and arrested a United Arab Emirates (UAE) national and three others from the city. But a kingpin of the racket, Kamlesh, based in Hong Kong is still absconding. This consignment was shipped into the country from Karachi in April 2007. The first shipment arrived in Gujarat. It was the Gujarat police who informed the city police of the Hyderabad link.