It would normally be attached to the crankcase. Ideally, it should be as close to the starter motor as possible. Edit: I believe even the position of the crankcase ground has been known to cause problems if there's poor electrical contact between the primary case and the crankcase.
Also, although the harness has a battery ground (red wire) ring terminal and the Mk3 wiring diagram shows a secondary ground wire connected to the battery positive, the harness ground wire should
not be connected to the battery positive terminal whenever an electric starter is used. This was a serious factory error that could potentially burn out the harness ground wire (if not the complete bike) if the main cable becomes loose, detached or has a high resistance!
Only the heavy gauge cable should be connected to the battery positive terminal so all the electrical circuits use that as the battery 'return/ground' via the head steady ground connection to the engine.