Italian police on Saturday arrested a Pakistani father and son who allegedly spent just over $200 to set up a reliable and untraceable phone network that was used by the militants who carried out last year's terror attacks in Mumbai, India.

The two were arrested in an early morning raid in Brescia, where they ran a money transfer agency, and it is was not immediately clear if they were aware of the purpose their funds had served, police in the northern Italian city said.

The day before the attacks began on Nov. 26 they allegedly used a stolen identity to send money to a U.S. company to pay for Internet phone accounts used by the attackers and their handlers, said Stefano Fonsi, the head of anti-terror police in Brescia.

The transfer was just $229 but gave the militants five lines over the Internet, which are difficult to trace and allowed them to keep in touch even during the rampage, Fonsi said.

The arrests on the eve of the first anniversary of the attacks underscored the long-standing concern of experts and officials over the ease with which small sums can be channeled through money transfer agencies to fund deadly terror plots.

Italian police began the probe in December after being alerted by the FBI and Indian police about the transfer, Fonsi told The Associated Press by phone.

Ten militants, allegedly from Pakistan, killed 166 people in a three-day assault on luxury hotels, a Jewish center and other sites in India's financial capital. One Italian was among the 19 foreigners killed.

The money from Brescia was transferred under the identity of another Pakistani who had never been to Italy and was not involved in the attacks, Fonsi said.

He lives in Spain and his identity was probably stolen when he used another money transfer agency somewhere in the world, Fonsi told a news conference.

The order to open the accounts with the Callphonex company came from two men in Pakistan, he said. Fonsi added that Italian authorities had shared details of their identities with Pakistani officials.

The two suspects in Brescia, identified in a police statement as 60-year-old Mohammad Yaqub Janjua and 31-year-old Aamer Yaqub Janjua, are accused of aiding and abetting international terrorism as well as illegal financial activity. The Madina Trading agency, which operated on the Western Union money transfer circuit, was seized by police.

Callphonex and Western Union are not accused of any wrongdoing. The companies did not return messages seeking comment on Saturday. Western Union has said it cooperates fully in fighting terrorism and has spent millions worldwide in compliance efforts.

Early in the probe, suspicions focused on Iqbal Javaid, the man whose identity was used for the transfer, and the Janjuas told investigators and the media they didn't remember him and didn't know his whereabouts.

"They certainly sidetracked the investigation," Fonsi said. "But we don't have clear proof that they were aware of what the money was for."

Though Jihadist propaganda leaflets were found in the home of one of those arrested Saturday, there was no evidence that the two, who have lived in Italy since 1992, were directly linked to Lashkar-e-Taiba, the Pakistan-based group blamed for the Mumbai attacks, he said.

Transferring funds using the identity of other people was a common practice at the agency in Brescia, and the Italian probe broke up a ring of people who used the system for various criminal aims, Fonsi said.

Two more Pakistanis were arrested in Saturday's raids for allegedly committing fraud, money laundering and other crimes through the masked transfers, but they were not linked to the Mumbai attacks. A fifth Pakistani man escaped arrest and was still being sought.

An additional 12 people were flagged to prosecutors for possible investigation but were not arrested, Fonsi said.

Just by using Javaid's stolen identity, the suspects had transferred some $590,000 between 2006 and 2008 to various countries. The network also used its contacts in Pakistan to help illegal immigrants enter Italy, Fonsi said.

Like other Western countries, Italy has shown concern over the use of money transfer agencies amid fears that funds to terror groups are being hidden in the flow of payments sent by immigrant workers back home.

The government has progressively cut the amount that can be sent by these means, but the small payment for the phone lines was still much lower than the current limit of $2,900 per week.

Many attacks in recent years have been funded on the cheap.

For example, the British government has said, the operation that blew up three London subways and a bus in July 2005, killing 52 commuters, used readily available materials and cost the equivalent of $15,000.

For the March 11, 2004 bombings on four Madrid trains that killed 191 commuters, some estimates say the perpetrators spent less than $1,400 of their own money.