Canada’s federal government has announced that a powerful and ruthless Indian gang which uses “murder, shootings and arson” to extort and intimidate diaspora communities – and has alleged links to India’s ruling government – has been designated as a terrorist entity.

Canada has accused the Lawrence Bishnoi gang of possible involvement in the murder of prominent Sikh activist and Canadian citizen Hardeep Singh Nijjar near Vancouver.

Public safety minister Gary Anandasangaree said on Monday that the new designation would allow officials to seize any assets of the gang within the country and “gives us more powerful and effective tools to confront and put a stop to their crimes”.

The two countries were locked in a bitter diplomatic spat after Canada’s federal police agency concluded that India, with help from the Bishnoi gang, planned and ordered Nijjar’s murder. But under prime minister Mark Carney, the standoff has shown signs of easing after the countries announced plans to share intelligence in an effort to combat the rising threat of international crime and extremism.

Anandasangaree said the Bishnoi gang had grown emboldened on Canadian soil, creating “a climate of insecurity in [diaspora] communities by targeting them, their prominent community members, businesses and cultural figures” through threats and violence.

Anandasangaree’s decision reflects both an escalation in Canada’s fight against powerful and well-organized street gangs – and the challenges of combatting a gang whose leader governs with impunity while behind bars in an Indian jail.

Lawrence Bishnoi, the 32-year-old from a small village in Punjab, is now widely regarded as India’s most feared mob boss. He has been confined to a prison cell for nearly a decade, but his sprawling criminal enterprise, which started as a from a small-time racket on a university campus, has morphed into an international syndicate linked to some of the most high-profile killings both in India and abroad.

The 2022 murders of Punjabi rapper Sidhu Moose Wala and the Mumbai-based Baba Siddique, an influential 66-year-old politician, are allegedly linked to operatives of the Bishnoi gang.

Last year, Canada’s Royal Canadian Mounted Police (RCMP) said Indian diplomats had engaged in criminal activity in Canada including the harassment and targeted killing of Canadian Sikhs linked to the Khalistan separatist movement. Police named the Bishnoi group in their allegations and said investigators believed they were “connected to the agents of the government of India”, operating as part of Narendra Modi’s strategy to pursue opponents and rivals.

Delhi has long rejected the allegations as “strange” and “ludicrous”. But Canadian police say they have a growing list of examples, including the 2023 murder Nijjar in the parking lot of his gurdwara near Vancouver.

They also point to Sukhdool Singh Gill who was shot dead in Winnipeg. Gill, a member of the Bambiha gang, was wanted in India on charges of extortion, attempted murder and murder. But Indian officials also said he was also linked to the separatist Khalistan movement.

A year later, police on Vancouver Island were called to the house of AP Dhillon, a prominent singer and producer who was born in Punjab and grew up in Canada. The building had been peppered with gunfire, and two vehicles were charred ruins.

Footage of the attack – apparently filmed by one of the assailants – was later posted online and shared widely in India. The British Columbia public safety minister called the attack “absolutely outrageous”.

RCMP commissioner Mike Duheme said police had uncovered “well over a dozen credible and imminent threats to life” leading police to issue “duty to warn” notices, including to the brother-in-law of New Democratic party leader Jagmeet Singh.

Canadian police have arrested at least eight people, including three believed to have killed Nijjar, in connection with homicide cases and nearly two dozen people in connection with extortion investigations.

Under Canada’s criminal code, it is an offence for anyone in the country, and those abroad, to knowingly deal with property owned or controlled by a terrorist and to directly or indirectly provide property knowing that it will be used by or to benefit a terrorist group.

The designation of the Bishnoi gang was welcomed by the World Sikh Organization, which said criminal activities are at an “unprecedented high with countless businesses” facing extortion and threats.

“While this designation is an important first step that equips law enforcement with stronger tools to confront this menace, it is critical that the true architects of this violence are also held to account.”