NEW DELHI Bangladesh has expelled a Pakistani diplomat posted at the high commission in Dhaka for allegedly running an operation to smuggle fake currency across the border to undermine India’s financial system and fund terrorist groups. The arrest has uncovered an elaborate network that included former army officers, academics and petty criminals who had been recruited in the effort to get the fake notes into circulation in India.Assistant visa officer Mohamed Mazhar Khan was arrested last month by the Bangladeshi authorities for his role in the syndicate that is said to have been pushing fake Indian currency notes (FICN) through the Assam and West Bengal border, senior Bangladesh government officials told ET from Dhaka. Khan, who was arrested along with a local accomplice on January 12 in the capital Dhaka, had to be released owing to his diplomatic immunity but the diplomat was expelled at the directive of the Bangladesh foreign ministry after being declared persona non grata.Pakistan foreign office spokesperson Tasneem Aslam denied Khan was engaged in wrongdoing. “Allegations against him are baseless and the incident is unfortunate,” she said. Bangladeshi security agencies put the Pakistan High Commission in Dhaka under watch after Khan’s arrest.It may be recalled that in the middle of last year, two senior Pakistani diplomats were expelled from Sri Lanka on charges of aiding terror groups in south India that had plans to target the US and Israeli consulates.Khan failed in his attempt to evade arrest and keep his identity a secret. Documents in his possession also revealed that he was in touch with members of outlawed terror group Hizb-ut-Tahrir, officials in Dhaka alleged. Indian officials said counterfeit currency is also being used to fund terror groups such as Jamaat-ul-Mujahideen in Bangladesh.India has long been concerned about fake currency networks in Bangladesh run by operatives of Pakistan’s Inter-Services Intelligence (ISI) agency, which backs terrorist groups that operate in the country. Sheikh Hasina’s Bangladesh government had earlier initiated a crackdown on such operations at India's behest. After being tipped off by India about Khan's syndicate, it launched a meticulous inquiry, government officials in Delhi told ET."As this was a serious allegation involving a diplomat, the Bangladesh government had launched a thorough investigation so as not to leave any loose ends," a senior official said, indicating that the Sheikh Hasina government had shared details of the probe with India.Khan's network is said to have included retired armed forces officers of Bangladesh, businessmen and those who worked for Pakistan International Airlines (PIA), officials said. Residents of the Bangladesh districts that border West Bengal and Assam were also part of the syndicate, Bangladeshi officials alleged. Bangladesh shares a land boundary of more than 4,000 km with India. In 2009-10, Nepal had similarly assisted Delhi in cracking down on a fake currency racket.Others in the network included police officers and academics in Bangladesh, the investigation showed. The person who was arrested along with Khan, Mohamed Mozibur Rahman, is a local hoodlum who revealed details of the scheme during interrogation, officials in Dhaka said. Rahman told Bangladeshi authorities about thePakistani diplomat’s involvement. He also said that Jalil Akhter, another person with a criminal background, was also part of the fake currency syndicate. Akhter was entrusted with distributing the counterfeit currency among certain individuals in Bangladesh's border districts who then moved these notes across into India.Rahman also revealed that he had been in touch with Khan’s predecessor at the Pakistan High Commission in Dhaka, Bangladesh officials said. It has been learnt that Rahman travelled to Pakistan 22 times in the past decade. He had also travelled to India (11 times) and Thailand (22 times) as part of his efforts to distribute fake Indian currency, officials said.On the last occasion, Khan had given Rahman Rs 1.8 lakh in fake notes. Rahman said in court that Khan had employed various other local criminals in the syndicate. Based on Rahman’s confession, Pakistani citizen Mohammad Imran was arrested from Dhaka's Hazrat Shahjalal International Airport on January 15. He was carrying Rs 80,000 in fake Indian rupees. Investigations revealed that Imran had entered Bangladesh with a fake passport and visa.Rahman was also in touch with other Pakistan High Commission officials in Dhaka, Bangladesh officials said. Khan was also alleged to have engaged with terror and extremist groups including Jamaat-e-Islami. Bangladesh is now planning to introduce sticker type visas to prevent Pakistanis in particular from using fake visas to the country, apart from putting such visitors under closer scrutiny.Relations between Pakistan and Bangladesh have been worsening of late. Last month, Bangladeshi police arrested four suspected members of the Islamic State in Dhaka including a regional coordinator for the group who told police they had been trained in Pakistan. Tensions have also risen between the two countries over executions carried out by the Sheikh Hasina regime against alleged war criminals from the 1971 war.