hawala in the news again

StealthMonger StealthMonger at nym.mixmin.net
Sat May 15 03:44:21 PDT 2010

Hash: SHA1

Hawala has been discussed in this forum [1] in connection with the
design of digital money systems.  Now hawala is in the news (again).

[1] For example:

   Message-Id: <p05200f64ba486a6a2cf0@[]>
   Date: Mon, 13 Jan 2003 08:21:27 -0500
   To: Digital Bearer Settlement List <dbs at philodox.com>,cypherpunks at lne.com
   From: "R. A. Hettinga" <rah at shipwright.com>
   Subject: Money laundering regulations
   Sender: owner-cypherpunks at Algebra.COM


Why FBI is following the money in Times Square bomb case

   Three Pakistani men arrested Thursday in Massachusetts and Maine may have used an
   informal network known as hawala to channel funds to alleged Times Square bomber
   Faisal Shahzad, officials say.  Counterterrorism efforts have made it increasingly
   difficult to transfer money by traditional means.

   By Peter Grier, Staff writer / May 14, 2010

   Three Pakistani men arrested Thursday in connection with the case of alleged Times
   Square bomber Faisal Shahzad may be connected to an informal money-moving network
   that terror groups are increasingly using to finance their activities.

   The three men may not have known how Shahzad intended to use the money in question,
   say the officials.  Indications are they are not terrorist financiers per se, but
   links in an informal network of brokers, known as hawala, used to transfer cash
   quickly and easily over long distances.

   "Hawala is a popular value transfer method that predates the Western financial
   system and remains less expensive, and at times more widely available, than modern
   banking for transmitting legitimate funds around the world," writes John
   Rollins, a specialist in terrorism and national security with the Congressional
   Research Service, in a March report on terrorists and transnational crime.

   Thursday's high-profile law enforcement sweeps netted two men in Massachusetts
   and one in Maine, according to the FBI.  Sen. Susan Collins (R) of Maine said there
   is no direct connection between the arrestee from her state and Faisal Shahzad.

   Law enforcement officials instead indicated that the Times Square bomb suspect may
   have used hawala money-moving services provided by the men.

   Hawala dealers, also known as hawaladars, operate as part of an informal financial
   network used to bypass the traditional banking system.

   Here's how it works: Say a man in Pakistan wanted to send cash to a colleague in
   the US.  He would visit a hawaladar in his own country and hand over the money, plus
   a fee of about 5 percent.

   The Pakistani hawaladar would communicate with a trusted counterpart in the US, and
   indicate who should get the money, and how much.  The US hawaladar would then make
   the payment.  Usually, no money for that individual transaction actually travels
   between the two countries.  The US hawaladar would simply carry the debt until one
   of hi s clients needed to send money to Pakistan.  Then the whole process would be
   carried out in reverse.

   Hawaladars are supposed to obtain a license in the US, but few do.  It's a
   system that immigrants often use to send remittances back home, and that families
   abroad use to send money to, say, students in the US.

   But counterterrorist efforts have made it increasingly difficult for Al Qaeda and
   its associated groups to send money through the regular banking system.
   Increasingly the US and other nations have turned their scrutiny to the more
   informal hawaladars, said David Cohen, assistant secretary for terrorist financing
   at the US Department of Treasury, in January remarks before the Council on Foreign

   "As we have become more successful in preventing the abuse of the formal
   financial system, illicit finance has increasingly migrated to these other
   transmission techniques," said Mr. Cohen.

   According to Cohen, Al Qaeda's traditional sources of funds, such as donors
   and charities in Saudi Arabia and other Gulf countries, have dried up due to world
   counterterrorism efforts.  Top Al Qaeda leaders in recent months have taken the
   unusual step of issuing public pleas for funds.

   "Al Qaeda is in its worst financial state in years," Cohen said in April
   at a luncheon sponsored by the Washington Institute for Near East Policy.

   According to news reports, Al Qaeda has even begun charging some recruits for
   training.  The going rate for an AK-47 rifle, ammunition, and grenades is about

   But terrorist attacks in Western countries do not cost a lot of money.  The 2004
   Madrid subway bombings cost a total of about $10,000, f or instance, according to
   an estimate by the Financial Action Task Force, an intergovernmental antiterrorist

   Regardless of the amount, US counterterrorism officials still take a cue from what
   Deep Throat told Washington Post reporter Bob Woodward during the Watergate
   investigation: "Follow the money."

   These days, that's a challenge.

   "The international community faces a daunting challenge in confronting global
   terrorism financing," Cohen told the Washington Institute luncheon.  "The task is
   especially tough in today's environment, with money constantly crossing
   borders and rocketing around the globe."

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