In the jungles of India, local animal trappers have a new breed of client: Islamic militants using the trade in rare wildlife to raise funds for their cause. Adrian Levy and Cathy Scott-Clark report from Assam

It is so early in the morning that the cooks in the roadside dhabas along India's National Highway 37 are asleep in their kitchens, their tandoors unlit. Across the valley of Assam, in this far north-easterly corner of India, there is not a flicker of light except the feeble yellow beams from the Gypsies, the open-backed vehicles carrying small groups of tourists to the edge of one of the world's most bountiful jungles.

Kaziranga - 429 sq km of forest, sandbanks and grassland - was recognised by Unesco in 1985 as a world heritage site. Tourists come in their thousands to glimpse some of the 480 species of bird, 34 kinds of mammal and 42 varieties of fish, many rare, endangered or near extinct, that inhabit this remote jungle.

In recent times, however, the wildlife has attracted a new kind of visitor. According to India's security services, police, intelligence analysts, local traders and forestry officials, Islamic militants affiliated to al-Qaida are sponsoring poaching in the reserve for profit. These groups have established bases in the formerly moderate enclave of Bangladesh and have agents operating all along the country's porous 2,500-mile border with India. They have gone into business with local animal trappers and organised crime syndicates around Kaziranga - as well as in parks and reserves in Nepal, Burma and Thailand - in a quest for horns, ivory, pelts and other animal products with which to raise "under the wire" funds that they can move around the world invisibly.

A small rhino horn, the size of a bag of sugar, with good provenance (the beast's tail and ears, presented to a prospective buyer) and in the right marketplace (in Asia, Europe or North America), can fetch £20,000. Big cat pelts can go for up to £10,000. Monkey brains, bear bile, musk, big cat carcasses, elephant feet, tails, horns and teeth have considerable value. A shipment worth £2.8m was recently intercepted by UK customs. Profits from the trade run from $15bn to an incredible $25bn a year, according to estimates from the WWF (formerly the World Wide Fund for Nature). The punishment for trading in these items is generally a fine as low as £300 in India and £900 in Nepal.

A senior Indian security source, based in the north-east, who has tracked the incursion into the trade by Bangladeshi militants, warns that the poaching has global consequences. "There is an environmental disaster in the offing here, but as pressing are the security ramifications," he says. "Only a minuscule percentage of the vast profits need to trickle back into a nascent Islamic insurgency in a country like Bangladesh to bring it to the boil. And then it can reach out around the world."

In 2000, US president Bill Clinton commissioned "a global threat assessment" which concluded that the illegal trade in animal parts and endangered species was second only to drugs in the profits it could turn. That same year, the UN general assembly expressed its strong conviction that the "transnational crime" of trafficking in endangered species had growing links with terrorism. The WWF took up the baton and commissioned a report from Wolverhampton University that found organised crime was taking advantage of existing routes used for smuggling small arms, drugs and humans. The UK scene was a microcosm, with 50% of those prosecuted for wildlife crimes having previous convictions for serious offences including drugs and guns.

That's if there is such a prosecution: ill-defined laws often prevent police making arrests. British torpor was highlighted in London in 2004, when customs intercepted a multimillion-pound ivory haul but were powerless to arrest anyone. Meanwhile, radical Islamists from Bangladesh have done what conservationists had long predicted and moved in on the endangered species racket.

One has only to tour Kaziranga, or any of the outlying parks in Assam or Nepal, to understand why. Dawn breaks as our convoy of Gypsies reaches the park. The rangers whisper urgently, "Gorh", the local word for rhinoceros. Metres away, eight rhino are lumbering through the rich alluvial mud, showing off their prized uni-horn. There are more than 2,000 of these short-sighted beasts here, making up three-quarters of the global stock of one of the rarest pachyderms in the world. Beside them are scores of swamp deer coloured like the scrub. A group of wild buffalo, whose colossal horns have the span of a longboat oar, plod by, as does a troop of elephants, their tusks glinting in the purple dawn. Somewhere in the long grass, which rises in clumps like a castle keep, are more Royal Bengal tigers per square kilometre than in any other stretch of jungle in the world - broken down into their constituent parts, each is worth as much as a bespoke Italian racing car.

The gangs hired to trap and kill in Kaziranga are said by forestry staff to camp on the vast sand bars created by the flow of the Brahmaputra river. The river here is at least a kilometre wide and we haggle with a man paddling a wooden canoe to take us across. But as soon as it dawns on him where we intend to go, he backs out of the deal. "I will not go there," he says. "The people who live there will skin me alive." He offers to rent us his boat instead, and with our driver, a migrant from the impoverished state of Bihar, we launch ourselves into the water. The nearest sand bar is clearly visible, but so vicious are the currents that it takes two hours to reach it.

As we near, people who look more like Saharan Touaregs than Assamese run towards the shore, waving hunting rifles. Trapped in a swirling eddy, we can't decide what to do. From the sand bar, they pelt the canoe with stones. The Bihari driver, who understands what they're saying, starts screaming. The canoe pitches and rolls as we try to calm him. He takes a deep breath and addresses the angry crowd: "These are only here for talking. Please... These bring gifts. Not the police." We hold up baskets of fruit, bags of nuts and sweets. The sand bar dwellers lower their weapons and motion us ashore.

We climb the bank and at the crest of the dune see there are hundreds of them, living in an improvised encampment. We want to know about life on the sand bar, we say, passing round the food. They shrug, munching. One man offers: "We are people who have few rights." Another agrees: "We are poor and we do what we can." Does that include poaching? Has anyone trapped animals from Kaziranga? Now everyone is eating and nearly all the hands shoot into the air.

One man says, "We are for hire. We can trap and shoot, but when the summer rain comes, the river breaks its banks and the animals float to us." Another adds, "We patrol the park's border, too; when the animals wander out, we are there." He pulls from his pocket an unidentifiable animal claw.

These sand bar dwellers at the start of the tangled enterprise know far more about the intricacies of the business than the authorities told us they would. They draw trafficking routes in the sand, explaining how the trade is coordinated by agents across Assam. A villager places stones on the sand-map to mark the towns. "Golaghat, Tezpur, Kamrup, Nagaon, these are the main places for agents." They answer to a boss based in Dimapur, one of the richest cities in the neighbouring state of Nagaland, with a highway that runs into Burma and rail links to New Delhi and Calcutta . "But everything tends to collect and move through Siliguri," a villager says, identifying a chaotic city in West Bengal which is also a springboard into the Himalayan kingdoms of Nepal and Bhutan.

What do they poach? "Whatever we can and whatever we are asked for." The money is in rhino horn and elephant tusks, the latter taking advantage of a black hole in the forestry department's record-keeping. While the rhino population remains closely monitored, no accurate records are kept for elephants. The forestry department estimates that 170 were poached over a six-year period, but the sand bar people claim a figure almost double that.

From whom do they take orders? The villagers look stony-faced. They talk among themselves. "The Tibetans and Chinese are big men in this," says one, "but we are all from Bangladesh. Bangladeshis dominate the network now." Are they talking only about those living in India, or about orders coming from over the border, too? They shrug and mumble, clearly distressed. We should talk to an agent they name in a nearby city. They cannot tell us any more.

In nearby Tezpur, the wildlife trade agent turns out to be a rich local jeweller, but he is tight-lipped and refers us to his boss in another town. This boss, who runs a local hotel, says he can't talk without clearance from the bhai, the big boss in Siliguri. After 10 hours on the broken highway, we find his modest house in a chaotic suburb. Over plates of daal-fry, bread and curd, he tells us he is a haulier, shipping freight over the border with Bangladesh, but also "a man of many hats. One hat, you could say, is in animals. I move a lot of everything: elephant ivory, cat skins, musk deer, bear gall bladders, rhino horn, live leopard cubs that are sent to Nepal, Burma and then into Thailand. The prices we pay are so low, the profit margins are healthy." He opens both arms expansively, as if demonstrating the size of a fish. "We can get a snow leopard pelt for $1,000 and sell it for 10 times that. Ivory can be bought for as little as $200 a kilo and sold for 100 times this."

He munches on a red onion as a glass of milk poured straight from a churn froths in front of him on the table. How did he get involved? The wildlife trade in the town took off in 1983, he says, when old trafficking networks in Calcutta were effectively shut down by the police.

The Siliguri police confirm that soon after this, a stash of horns was discovered, tipping them off to the town's new business. But it was not until 1995 that the local authorities grasped the scale of the racket when, in the first operation of its kind in India, an entire syndicate trading in rhino horn was rolled up and found to have members in China, Taiwan and Tibet. "But these police successes were few and far between," claims the haulier, showing us his gleaming new trucks and his home - the first in town to have a flat-screen TV, now with one in every room.

He is happy to talk, and calls colleagues to confirm his stories. Eventually we ask who's behind the Bangladeshi business. "Where, not who," he says and points to Bangladesh. "Religious men hold the purse strings now. The business has changed. Their agents came to see us. They want a low-risk business."

A trader from Siliguri with betel-red teeth tells the same story. "This was a Chinese business but now it's Bangladesh's business. It's become God's work," he says, raising an eyebrow. "And, as you know, the Prophet, peace be upon his head, is irresistible."

It all began two years ago. Says the haulier,"A friend in common at a local mosque [in West Bengal] passed me a message saying representatives working for two militia groups in Bangladesh wanted a meet in a madrassah [seminary] in Siliguri."

A trader with an import-export company near to the India-Bangladesh border explains: "They came to us because we are the same as them," he says. "The hauliers and money men behind the wildlife trade are of Bangladeshi origin. The poachers, too. All of us can move freely over the border. We look right. Talk the same. They wanted in. Small, valuable commodities - horn, teeth, pelts - fetch incredible prices and are easy to conceal among legitimate export goods. Also, something truly valuable can be used to borrow against, to secure a line of credit."

The traditional methods by which anyone wishing to raise and transport money invisibly were through nominal charities, the gold market and the global unofficial banking system known as hawala. But these were heavily disrupted after September 11 2001, the traders say. New channels were needed.

Three of those who claimed to have been at the meeting two years ago say they knew exactly whom the agents worked for in Bangladesh: Al Mujahideen, an obscure jihadist umbrella organisation governing a panoply of militant groups that have sprung up in Bangladesh in recent years. Two in particular, both banned by the Bangladeshi government, were in need of money and eager to get into the racket, said Siliguri traders. One was Harkat-ul-Jihad-al-Islami (HuJI), allegedly linked to al-Qaida; the second was Jama'atul Mujahideen Bangladesh (JMB), whose leader, Shaikh Abdur Rahman, had joined Bin Laden's World Islamic Front for the Jihad Against the Jews and the Crusaders in 1998. He was captured in Bangladesh and in March was hanged for the killing of two Bangladeshi judges and for nationwide bombings in 2005.

A 147 million-strong, predominantly Muslim state, Bangladesh was once renowned for its religious and ethnic tolerance. Then, six years ago, Jamaat-e-Islami, a radical Islamic party, was elected as a coalition partner in the ruling government.

Extremists, especially the HuJI and JMB, have already been accused of a string of terrorist attacks. In June 2001, former prime minister Sheikh Hasina was injured when an explosion killed 20 and injured 300 at a rally in Dhaka. On May 21 2004, Anwar Choudhury, the British ambassador to Bangladesh, was targeted in a bomb blast that claimed the lives of three others, including his bodyguard. In January 2005, the former finance minister and four other opposition activists were killed and 70 people injured when a grenade was thrown during a meeting in the north. Some graduates from terrorist training camps run by the HuJI were recently arrested, suspected of plotting a coordinated wave of 459 explosions that detonated across Bangladesh on August 17 2005.

There is already an international dimension, too. After the fall of Kabul in 2001, in a now notorious incident, the MV Mecca, a boat loaded with 150 Taliban and al-Qaida cadres, was said by Bangladeshi intelligence sources to have anchored off the country's Chittagong port, where small boats ferried them ashore. The Indonesian authorities raised concerns about the direction Bangladesh was taking after interrogating "Hambali", the leader of Indonesia's militant Jemaah Islamiya group, who was arrested in Thailand in connection with the Bali bombings in August 2002. Hambali, currently in US custody at Guantánamo Bay, allegedly admitted having made plans to shift part of his organisation to Bangladesh as life got more difficult at home.

Earlier this year India said it had intelligence connecting Bangladeshi militant groups with some of those behind the Mumbai train blasts of July 11 2006, in which more than 100 people died and 700 were injured. India also claims that on January 4 this year, two Bangladeshi nationals, who admitted belonging to HuJI, were arrested in New Delhi carrying 1.42kg of explosives, four electronic detonators and two hand grenades thought intended for the Republic Day celebrations.

The Indian security services officer we interviewed says, "There has been a significant migration from Bangladesh, with tens of millions fleeing to expatriate communities abroad. Poverty has helped radicalise them and we have put to your government our concern that the increasingly ambitious militant groups in Bangladesh are aiming to incite the exiles and so broaden the jihad - as Pakistani groups did in Britain."

This warning was echoed by Bruce Riedel, a former director on Clinton's National Security Council, at a conference in the US in February. "After September 11," he said, "al-Qaida determined it would be increasingly difficult to bring Arab or South Asian operatives into the [West] on Arab or South Asian passports. They needed to look for a new mechanism in order to move operatives around. They found it, for example, in the large Pakistani and Bangladeshi communities in the United Kingdom. Those communities turned out to have a significant, albeit small, minority of radicals who could be encouraged to perform al-Qaida's dirty work for it. Since those people had as a birthright a British passport, they had relatively easy access into the UK and out, and into the US and back into Pakistan."

In Kaziranga, an anti-poaching patrol prepares to leave: 16 men, nine carbines, rope, machetes, plastic sheeting - and eight elephants. Only elephants are capable of navigating the sodden terrain. As we move forward, the canopy overhead thickens. There is a micro-climate beneath the tree tops; a humid mizzle generated by the perspiring vegetation folds around us.

Clouds of pinprick flies swarm, irritating everything they touch. Creepers with blood-red scales snag skin and clothing; high above our heads, amid a bouquet of jungle orchids, red spiders have trapped a nectar-hunting bird. No one lingers too long. Small mistakes here have grave results. Fall over and the soupy air prevents a scab forming; toxic spores blossom in an open wound. None of us dares drop litter or personal possessions, not just because the jungle is pristine but because we do not want to leave a trail for predators.

By five it is dark. We have seen nothing suspicious, but the thick vegetation obscures everything. There is a strange drumming in the mud up ahead. It sounds like digging. The branches crackle. No tour parties are allowed this far in. Anyone we encounter will have to shoot their way out because they know the park rangers will fire on them first. The elephants rip into the undergrowth, the rangers raise their rifles.

We reach the banks of a vast lagoon and catch sight of something skimming away from us. It might be a canoe, or an animal. The rangers mutter. They fear it is poachers. One lets loose a shot out of frustration. Timid wildfowl tear out of the undergrowth, shrieking, setting off the bar-headed geese, which clatter and flap over the water. A lame Chinook clips the trees, shaking up a colony of ring-tailed macaques; they go off like car alarms. Osprey, kites and fish eagles. Wigeons, pigeons, shovellers and barbets. Shrikes, thrushes and bronzed drongos. Names of birds, inelegant and bizarre, are whispered by the mahouts, who identify everything they see as if constantly making an inventory of the jungle that is now at screaming pitch. A radio crackles. It is the rangers' HQ calling.

Miles away, with the electricity supply cut again, the duty officer huddles by a loudspeaker powered by a car battery. Next door, Central Range chief Dharanidhar Boro sits at his table, a bowl of rice in front of him. He is one of the most vigorous of the park's rangers charged with disrupting the poaching. But he is exhausted.

Boro is an awkward man. He does not drink or get stoned when all around him do. He believes in straight talking. "We cannot stop but it is difficult sometimes to go on. We are up against it. This is hard, hard work. We have to be merciless. This is a war for survival."

He pulls from a cabinet a photo album. On the first page is a picture of a corpse splattered by shotgun fire. "I killed this man as he prepared to stake out a rhino." He turns the pages and points to another corpse, its entrails dangling like ship's bunting. "I killed this one, too, as he sawed at a rhino's horn." There are scores more photographs picturing the dead laid out like mackerel.

We ask him about the new jihadi component in the trade. "We hear things but we have no hard facts. The rhino horns are used to buy guns and bombs, we are told. The guys we catch, what can they tell us? The colour of the shirt worn by the guy who paid them off."

In December, Boro's men tracked a gang of poachers to their tents. They had fled but left behind a new, modern tranquilliser gun and darts. "They used to shoot at rhinos, but the crack of the bullet is a problem as it carries far and we will hear. Some place poison. Others pull down power lines and try to electrocute the animals. However, recently they have come here with silencers. We are finding increasingly sophisticated weapons."

The poaching figures for Kaziranga were stark until very recently. As many as 48 rhinos a year were being killed for their horn, a figure comparable to about 2% of the total population in Assam. The state is classified as a "disturbed area", with a stubborn and often bloody secessionist movement desperate to break free from New Delhi. Militants have been fighting for 27 years and 10,000 lives have been lost. Recently, as peace talks began, there was a lull, then an insurgency blew up in Nepal. Boro says, "Through better organisation among the rangers and better stability in Assam, the gangs laid off us and started attacking Nepal, which also has rhino." Then he adds dourly, "We cannot count on peace."

Shortly before we arrived in Assam in February, seven Hindi-speaking labourers were shot dead at one of the state's brick kilns. A railway bridge was blown up, just missing a crowded train. Masked gunmen attacked six labourers' colonies in the northern districts of Dibrugarh and Tinsukia, killing 48 Indian settlers. Another eight people, including police officers, died when their vehicle hit a roadside mine in the central Karbi Anglong district. It was the state's worst violence in a decade, all the killings perpetrated by the United Liberation Front of Assam. An indefinite curfew was imposed while the Indian security forces combed the jungle for rebel camps and forest rangers hid themselves among the trees, waiting, resignedly, for the opportunists to arrive. Whether it's an independence struggle in Assam or an al-Qaida terror campaign, the outlook is perilous for the wildlife of Kaziranga.