The Indian government is setting up a centralized database to coordinate intelligence from central security agencies in its battle against money laundering and terrorist funding.

The database would act as a "ready reckoner" for different security, as well as law and order enforcement, groups, a report by the Press Trust of India said.

Sources in the home ministry said the goal is to greatly improve detection of illegal money movement within and outside the country and among groups or institutions using banks and other intermediaries.

The database would be created by the Financial Intelligence Unit-India, the national agency responsible for processing and analyzing information relating to suspect financial transactions.

The government announcement comes after an alarming increase in the numbers of suspicious and counterfeit money transactions in 2009. A finance ministry report said, the Financial Intelligence Unit-India detected 4,400 suspicious transactions last year, more than double the figure for 2008.

Banks also reported a major surge in counterfeit currency transactions. They reported just less than 8,600 incidences of receiving counterfeit money in 2008 but noted more than 35,700 last year.

The government also received 69 requests for information from foreign financial intelligence units while Indian institutions sent 17 similar requests to other countries, it said.

The government often works with foreign police organizations to investigate money laundering which is usually connected to cross-boarder drug dealing, as was the case in early December.

Indian police in New Delhi acting with British police arrested Naresh Kumar Jain, suspected of being one of the world's leading underworld bankers and also wanted in the United States.

The Serious and Organized Crime Agency in the United Kingdom had had Jain, 50, under investigation since 2006. Agency officers said they believe him responsible for laundering millions of dollars, including drug money in Britain, of profits from organized crime in the past several years,a report in The Guardian newspaper said at the time.

Jain, also known as Naresh Patel, was arrested in April 2007 by Dubai police but jumped bail in 2008. He allegedly ran his operations out of Dubai and was capable of shifting up to $2.2 billion of money a year to any country of a client's choosing.

Much of Jain's money was suspected of being moved by the informal hawala, an honor-based money transfer system primarily in the Middle East, East Africa and South Asia. His property in Dubai was searched and police said they found banking and wire-transfer evidence of layering, a money-laundering technique to disguise the origin of sham commodities trading that had links to a finance company in Manhattan, The Guardian report said.

The U.S. government seized $4.3 million of Jain's money and another $2.3 million from his business dealings worldwide has been frozen.

Jain remains in jail in New Delhi but insists that India's Narcotics Control Bureau has framed him, according to a report by the Press Trust of India. His suspected accomplice in hawala, Pakistani national but Dubai-based Ahmed Parvez, is being prosecuted in Italy, the bureau said.