Sources say Watali played a key role in receiving the funds received from Pakistan and then forwarding the same to the separatists and even kept account books for the same.
A statement by NIA stated, "Watali's arrest follows the searches conducted by the NIA on Wednesday at multiple locations in Srinagar, Handwara, Kupwara and Baramulla belonging to his relatives and employees. The searches have unearthed highly incriminating material pertaining to receipt of funds by Zahoor Watali from foreign sources and its further distribution to the terrorists and separatists in Kashmir valley for anti-India activities."
Watali's residence in Srinagar was first searched by NIA on June 3 during which it had recovered several financial documents related to terror funding apart from land deals handled by him.
NIA said that Zahoor Watali is suspected of acting as a "conduit" for illegally remitting funds to the secessionists, terrorists and stone-pelters.
He was earlier arrested in 1990 by Jammu and Kashmir police, when some anti-national activists were found present in his house at Bagat Barzulla, Srinagar. He was taken into custody along with Yaseen Malik, Sajjad Gani Lone, Bilal Lone and others and was jailed for eight months at Jammu.
In 2009, Watali was accused of illegal encroachment of a land and assault, and a case was registered against him at Parimpora police station in Srinagar.
The NIA statement said that Watali was also accused of travelling on a cancelled/invalid passport despite having full knowledge of its being invalid/cancelled.
"Instead of surrendering the cancelled passport to the authorities, he travelled abroad on cancelled/invalid passport on March 21 last year in violation of the law and again when he tried to do so, his invalid passport was seized at Delhi by the authorities," NIA said.