Pakistan Bans Alleged Militant Charity

Pakistan moved Thursday to dismantle an Islamic charity linked to militants suspected in the Mumbai attacks, arresting its leaders, closing its offices and freezing its assets.

The ban on Jamat-ud-Dawa came a day after it was declared a front for terrorists by the United Nations, subject to U.N. sanctions including an asset freeze, travel ban and arms embargo.

India says the Mumbai attackers were all Pakistani citizens and the assault was directed and planned in Pakistan. Islamabad is under intense international pressure to crack down on anyone connected to the attacks.

"This is the most comprehensive action taken by Pakistan so far and it shows there is eagerness here [in Islamabad] to do something to satisfy the Indians," said one senior Western diplomat who spoke to CBS News' Farhan Bokhari on the condition of anonymity.

The Mumbai attacks not only raised tension between the two countries but also raised fears in the Western world over mounting acrimony between two nuclear armed neighbors, reports Bokhari.

"The worst case scenario was that of tensions rising to the extent that India and Pakistan could be pushed into war, an all out war. The worst case scenario - a nuclear exchange," the anonymous diplomat told CBS News.

CBS News correspondent Sheila MacVicar, reported Wednesday that intelligence officials in South Asia and the United States have told CBS News there is great concern that India might take some military action against suspected militants. The primary concern is that Indian forces might bomb suspected militant sites in the Pakistan-controlled portion of Kashmir.

However, India's foreign minister said Thursday that war is "not the solution."

Lahore police chief Pervez Rathor said the group's head, Hafiz Mohammed Saeed and four other leaders had been placed under house arrest for three months. He did not say whether they would be charged with any crime.

"We have taken action in response to orders from the federal government," he said.

Earlier Thursday, authorities in the country's largest city, Karachi, said they had closed nine premises associated with the group. An Associated Press reporter outside one Jamat office in the city said it was locked up and deserted.

It was unclear what was happening at the group's large headquarters close to the eastern city of Lahore.

Pakistan has already arrested at least 20 people, including two extremists alleged by India to be key players in the Mumbai attacks, but India has made it clear it wants to see more action.

A Pakistani security official who also spoke to CBS News on condition of anonymity said the arrests highlighted Pakistan's determination "to do everything possible to assist India on the Mumbai attacks."

However, that official discounted the possibility of eventually extraditing of any of the suspects to India.

"In the past, we have drawn attention to people involved in terrorism on our soil who have taken refuge in India. The Indians have not extradited even one of those wanted by Pakistan, so how can Pakistan extradite the people wanted by India," the official told CBS News. "There can be no one way traffic here."

The attacks on Mumbai, India's financial center, killed 171 people and sharply raised tensions between the nuclear-armed neighbors, which have fought three wars over the last 60 years.

U.S. officials say Jamat is a front for Lashkar-e-Taiba, a banned militant group accused by India of carrying out and planning the Mumbai assaults.

The U.N. designation of Jamat and four of its leaders, including Saeed, came after Indian and U.S. pressure.

The group, which has offices, schools and medical clinics around the country, has repeatedly said it has no links to Lashkar.

Central Bank spokesman Syed Wasimuddin said all Pakistani banks had been ordered to freeze any of the group's assets. It is unclear how much money the group has under its control, but its Web site has details of a bank account to receive donations.

Earlier, Jamat chief Saeed denied that the charity was involved in terrorism and denounced the U.N. He said the group would petition the U.N. as well as national and international courts to overturn the decision.

"If India or the U.S. has any proof against Jamat-ud-Dawa, we are ready to stand in any court. We do not beg, we demand justice," he said.

Pakistan has promised to pursue those responsible for the Mumbai attacks.

But it complains that India has not shared evidence from its investigation, underlining the mistrust hampering U.S. efforts to avert a deeper crisis between the two countries.