NHRC considers “terrorism as a mad violator of human rights.” Terrorism involves a two-way violation and concerns both its victims and perpetrators; needless to say, a threat to national security as well. While discussing terrorism and human rights, one misses an important aspect which relates to the fuel for terrorism, i.e. money. This money for terrorist activities comes from legal as well as illegal sources, the latter commonly referred to as money laundering. The concept of terrorist financing hit the board with the World Trade Center attack in America and thereafter a lot of research has been done in this area under the head “Combating the Financing of Terrorism (CFT)”. Often Anti-Money Laundering (AML) and CFT is referred together there is a subtle difference between them. AML/CFT regime in India is relatively new and with its strong growing economy and demography faces a challenge in terms of handling AML/CFT activities. The present paper would begin with understanding the basic concepts and their inter-linkages and would lead to a further discussion on the challenges in terms of CFT administration as pointed out by FATF in its recent observance paper in July 2010. This paper draws an intuition from an earlier paper published by the author on Money Laundering as well as the recent controversies surrounding “black money” abroad and their possible use in financing of terrorism. Paper aims at opening up issues to ponder upon in national interest about national security and protection of human rights of billions of citizens.